LIBRARY 

THEIJNIVERSITY 
OF  CALIFORNIA 

SANTA  BARBARA 


PRESENTED  BY 

ALICE  SCHOTT 


HISTORY   OF 

COINAGE   AND   CURRENCY 

IN   THE   UNITED   STATES 

AND   THE   PERENNIAL 

CONTEST   FOR   SOUND    MONEY 


*£%& 


HISTORY  OF 
COINAGE  AND  CURRENCY 

IN  THE  UNITED  STATES 

AND   THE    PERENNIAL 

CONTEST  EOR  SOUND  MONEY 


BY 


A.    BARTON    HEPBURN,    LL.D. 

EX-COMPTROLLER   OF    THE   CURRENCY,   EX-SUPERINTENDENT 

OF   BANKING   DEPARTMENT  OF  THE   STATE  OF   NEW 

YORK,  VICE-PRESIDENT  CHASE  NATIONAL  BANK 


"Ntin  gorfc 
THE    MACMILLAN   COMPANY 

LONDON:   MACMILLAN  &  CO.,  LTD. 

.903         p^ 

All  rights  restr-ued 


Copyright,   1903, 
By    THE    MACMILLAN    COMPANY. 


Set  up,  electrotyped,  and  published  September,  1903. 


Norwood  Prest 

J.  S.  Cusbing  &  Co.  —  Berwick  &  Smith  Co. 

Norwood,  Mass.,  U.S.A. 


This  Volume  is  inscribed  to  the  Memory  of 

ALEXANDER    HAMILTON 

Patriot,  Soldier,  Financier,  Statesman,  Creative 
Genius.  In  the  dawn  of  our  national  life,  with- 
out guiding  precedent,  he  evolved  principles  and 
developed  systems  of  inestimable  and  lasting  value 
to  his  countrymen. 


PREFACE 

"  Of  making  many  books  there  is  no  end,"  and  yet 
this  volume  seems  to  possess  features  which  justify  its 
creation.  The  general  subject  of  this  history  has,  in 
its  different  phases,  been  treated  by  many  authors ;  but 
I  believe  there  is  no  one  work  of  convenient  size  and 
popular  character  covering  the  history  of  the  coinage 
and  currency  of  the  United  States,  with  data  and  details 
in  chronological  order,  available  as  a  book  of  reference. 
The  crucial  questions  relating  to  coinage  and  currency 
which  have  involved  the  material  and  political  interests 
of  the  country  so  largely  throughout  its  history,  and 
especially  for  the  past  quarter  of  a  century,  and  the 
honest  difference  which  many  people  have  experienced 
in  reaching  right  conclusions,  demonstrate  the  present 
need  of  such  a  work.  Most  important  currency  ques- 
tions remain  to  be  solved,  and  this  volume  seeks  to  fur- 
nish a  busy  public,  in  convenient  form,  the  experience 
of  the  past  to  aid  in  such  solution. 

The  aim  has  been  to  place  before  the  reader  original 
data,  so  as  to  enable  him  to  examine  the  same  and  reach 
his  own  conclusions.  A  documentary  history  pure 
and  simple  would  be  so  voluminous  as  to  possess  little 
value  save  to  the  student  and  economist.  A  narrative 
history  would  amount  to  a  treatise  embodying  largely 


Vlil  PREFACE 

the  opinions  and  conclusions  of  the  author.  This 
volume  seeks  to  combine  the  two,  and  in  the  text 
recites  events  and  gives  dates  and  data  with  painstak- 
ing care,  in  order  to  make  it  convenient  and  available 
for  purposes  of  reference,  while  the  Appendix  contains 
the  laws  of  the  United  States  relating  to  the  subject 
and  such  documents  as  are  of  paramount  importance. 
The  chapter  on  bibliography  aims  to  review  the 
standard  literature  of  the  subject  and  indicate  its 
character,  thus  enabling  any  one  to  pursue,  easily  and 
intelligently,  any  particular  branch  or  feature  to  as 
great  length  as  may  be  desired. 

The  tables  and  statistical  matter  with  which  this 
work  is  replete  have  been  prepared  by,  or  verified  by, 
Maurice  L.  Muhleman,  formerly  connected  with  the 
Treasury  Department  at  Washington,  and  for  so  many 
years  Deputy  Assistant  Treasurer  in  the  city  of  New 
York.  Mr.  Muhleman  is  one  of  the  ablest  statisticians 
in  the  country,  and  upon  all  matters  relating  to  finance 
is  an  expert  and  recognized  authority.  I  take  pleasure 
in  acknowledging  my  very  great  obligation  to  him  in 
the  preparation  of  this  work. 


CONTENTS 


INTRODUCTORY 

Economic  Problems  after  Independence.  Contest  between  Local 
and  National  Sovereignty.  State  Rights  Theories  complicate 
Economic  Questions.  Influence  of  Slavery.  The  Imperative 
Need  of  Nationalization.  Its  Ultimate  Adoption.  Effects  of 
Contest  not  yet  fully  eradicated.  Sound  Currency  impossible 
without  Nationalization.     What  is  Sound  Money  ?     . 


PART   I 

THE  PERIOD  PRECEDING    THE   CIVIL    WAR 
I.     THE   COINAGE   SYSTEM 

CHAPTER   I.     1776  to  1789 

Colonial  Systems.  The  Continental  System  under  the  Articles  of 
Confederation.  Reports  on  Coins  and  the  Establishment  of  a 
Mint.  Robert  Morris's  Plan.  Jefferson's  Plan.  Adoption  of 
the  "Dollar"  as  the  Unit.  Mint  Act  of  1786.  The  Constitu- 
tional Provisions .11 

CHAPTER  II.     1790  TO  1829 

Hamilton  on  the  Establishment  of  a  Mint.  The  Coinage  Act  of 
1792.  Decimal  Coinage.  The  "Dollar"  the  Unit.  Ratio  15 
to  1.  Foreign  Coins  in  Use.  Their  Valuation  and  Legal  Ten- 
der. Evident  Undervaluation  of  Gold.  Specie  exported.  Re- 
ports to  Congress  upon  the  Subject.  John  Q.  Adams.  Craw- 
ford.    Change  of  Ratio  discussed.     Efforts  to  retain  Gold.         .       20 

CHAPTER   III.     1830  to  i860 

Ingham's  Report.  Gallatin's  Views.  Sanford  and  White  Reports. 
Benton's  Fight  for  Gold.  Southern  Gold  Mines.  The  Act  of 
1834.     Ratio  16.002  to  1.     Resulted  in  establishing  Gold  the 


CONTENTS 


Standard.  The  Act  of  1837,  corrective  merely.  Ratio  15.988 
to  I.  Great  Increase  in  Gold  Production.  Export  of  Small  Sil- 
ver Coins.  Steps  to  reduce  their  Value.  The  Act  of  1853, 
making  Fractional  Coins  Subsidiary.  Increase  of  Specie.  Gold 
Standard  contemplated.  The  Act  of  1857  finally  abolishing 
Legal  Tender  of  Foreign  Coins.     General  Review    ...      34 


II.     THE   PAPER   CURRENCY 

CHAPTER   IV.     1775  to  181 1 

Colonial  Currency.  Continental  Currency.  Legal  Tender.  Infla- 
tion and  Great  Depreciation.  State  Banks  established.  Bank- 
notes. The  Constitution.  Opposition  to  Paper  Money.  Ham- 
ilton's Report  on  a  Federal  Bank.  The  Constitutional  Contest. 
The  Supreme  Court  on  the  Constitutionality.  The  First  Bank 
of  the  United  States.  Its  Function  and  History.  Recharter 
defeated.     Banks  owned  by  States 53 

CHAPTER  V.     1 81 2  to  1836 

Inflation  of  Bank  Currency.  War  of  1812.  Crawford  on  Currency. 
Suspension  of  Specie  Payments.  Treasury  Notes.  Dallas 
and  Madison  favor  Central  Bank.  Long  Discussions.  The 
Second  Bank  of  the  United  States.  Provisions  of  its  Charter. 
Difficulties  at  Outset.  Investigation  by  Congress.  Reformation 
by  Cheves.  Violent  Contraction  of  Currency.  Suffolk  Bank 
System.  Safety  Fund  Bank.  Bank's  Salutary  Influence  on 
State  Banks.  Its  Great  Usefulness.  Jackson's  Virulent  Antag- 
onism. "The  Bank  War."  Recharter  defeated.  Removal 
of  Deposits.  State  Bank  Inflation.  Distribution  of  Surplus. 
Liquidation  of  the  Bank.     Massachusetts  Banks      ...       76 

CHAPTER   VI.     1837  TO  ^49 

State  Banks  again  Supreme.  Speculative  Era.  Panic  of  1837. 
Suspension  and  its  Effects.  Van  Buren's  Subtreasury  Plan. 
Treasury  Note-issues.  Subtreasury  Act  of  1840.  Constitu- 
tionality of  State  Bank-notes.  Reaction  to  Sounder  Ideas. 
Establishment  of  Bond  Deposit  System.  Free  Banking.  Typi- 
cal State  Banks.  Repeal  of  Subtreasury  Act.  Defeat  of  Plan 
for  Third  Bank  of  the  United  States.  Tyler's  Plan.  The  Sub- 
treasury  Act  of  1846.  Mexican  War.  Treasury  Note£  Again. 
Banking  Power  by  Sections 122 


CONTENTS  xi 


CHAPTER  VII.     1850  to  i860 

PAGE 

Development  of  the  Reformed  Systems.  Clearing-houses  estab- 
lished. Western  Banks  not  greatly  improved.  Disreputable 
Condition  of  the  Currency.  Influence  of  Subtreasury  System. 
Inflation  of  Securities  and  Currency.  Specie  Payments  again 
suspended.  Treasury  Relief.  Buchanan  on  Banks.  More 
Treasury  Notes.  Circulation  violently  contracted.  Salutary 
Reaction.  Banks  and  Currency  in  i860.  General  Review. 
Banking  Power  by  Sections.  Several  Systems  compared. 
Evils  of  Subtreasury.  Shuffling  Policy  respecting  State  Banks. 
Development  of  Government  Note  Plan 155 


PART   II 

THE  PERIOD  FROM  1861    TO  1890 
I.     THE  UNITED  STATES  LEGAL  TENDER  NOTES 

CHAPTER  VIII.     1861  to  1865 

The  State  of  the  Treasury  in  1861.  Chase's  Administration.  De- 
mand Note-issue.  Suspension  of  Specie  Payments.  National 
Bank-note  System  advocated.  First  Issue  of  United  States 
Notes.  The  Legal  Tender  Feature.  Conversion  into  Bonds. 
Temporary  Loans.  The  Second  and  Third  Issue  of  Notes. 
Repeal  of  Convertible  Clause.  Interest-bearing  Notes.  The 
High  Premium  on  Coin.  National  Bank  System  established. 
Chase's  Policy  reviewed 177 

CHAPTER   IX.     1866  to  1875 

McCulloch's  Administration.  Retirement  of  Notes  after  Close  of 
War.  Congress  approves.  Subsequently  repents  and  checks 
Cancellation.  Volume  at  $356,000,000.  Gold  Certificates. 
Rise  of  "  Greenback  "  Element.  President  Johnson's  Position. 
The  Public  Credit  Act  of  1869.  National  Banks  attacked. 
Grant  and  Boutwell's  Administration.  Refunding  the  Debt. 
Currency  Certificates.  Panic  of  1873.  More  Notes  issued. 
Attempts  at  Inflation.  Reaction.  Resumption  decreed,  1875. 
Gold  Reserve  provided  for.     (  hronology  of  the  Greenbacks       .     205 


xii  CONTENTS 

CHAPTER  X.     1876  to  1890 

PAGB 

Attempted  Repeal  of  Resumption  Act.  Growth  of  the  "  Greenback 
Party."  Silver  Agitation  begun.  Sherman's  Administration. 
Act  of  1878,  suspending  Retirement.  Gold  Reserve  estab- 
lished. Silver  Certificate  issue.  Resumption  quietly  effected. 
Sherman's  Policy.  Crisis  of  1884.  Gold  Reserve  threatened, 
1885.  Attempts  to  increase  Note-issues.  The  Treasury  Surplus. 
Manning  and  Fairchild  in  the  Treasury.  Windom  and  the 
Treasury  Notes  of  1890.     Further  Inflation       ....     230 

CHAPTER  XI.    The  Legal  Tender  Decisions 

The  Question  of  Taxing  Notes.  Historical  Statement.  The  First 
Legal  Tender  Case.  Chase's  Opinion  as  Chief  Justice.  Dis- 
senting Views.  The  Decision  of  1871,  declaring  Constitution- 
ality. Chase's  Dissenting  Views.  Comments  on  the  Decision. 
The  Third  Decision.  National  Power  over  Money  Supreme. 
The  Dissenting  View.     Bancroft's  Comments     ....     259 

II.     THE   SILVER   QUESTION 

CHAPTER   XII.     1861  to  1878 

Erroneous  Views  on  Money.  Status  of  Silver  during  the  War. 
International  Conference  of  1867.  Germany  demonetizes  Sil- 
ver. Mint  Reform  Measures  discussed.  Reports  to  Congress. 
History  of  Act  of  1873.  Omission  of  Silver  Dollar.  The  Trade 
Dollar.  Silver  Production  increases.  Fall  in  Price.  Sectional 
Agitation  for  Rehabilitation  of  Silver  Dollar.  The  Silver  Com- 
mission of  1876.  Free  Coinage  proposed.  The  Bland- Allison 
Act  of  1878.  The  Hayes  Veto.  Silver  Certificate  Inflation. 
International  Conference  of  1878.  Propositions  considered  and 
rejected 274 

CHAPTER   XIII.     j 879  to  1890 

Silver  Agitation  continues.  Hayes  Administration  against  Silver. 
Congress  divided.  Silver  Inflation  goes  on.  International 
Conference  of  1881.  The  Gold  Reserve  threatened.  Treasury 
urges  Suspension  of  Coinage.  McCulloch  and  Manning  in  the 
Treasury.  Small  Silver  Certificates  extend  Use  of  Silver.  Gold 
Reserve  grows.  Fairchild's  Measures.  British  Silver  Com- 
mission. Divided  Opinion.  Silver  Certificates  displace  Bank- 
notes.    Windom's  Silver  Note  Plan.    "Sherman  Law"  of  1890.     297 


CONTENTS  xiii 


III.     THE  NATIONAL   BANKING   SYSTEM 

CHAPTER   XIV.     1861  to  1875 

PAGE 

Exigencies  influencing  Change  in  Bank-note  System.  Inefficient 
Act  of  1863.  Amended  Act  of  1864.  Analysis  and  Discussion. 
Act  of  1866,  taxing  State  Bank-notes.  Growth  of  the  National 
System.  Limitations  checking  further  Development.  Oppo- 
sition develops.  Interest  on  Deposits.  Reform  Bills.  Crisis 
of  1873.  Act  of  1874.  Redemption  by  Treasury,  eliminating 
Note  Reserve.     "Free  Banking"  under  the  Act  of  1875    •        •     32° 

CHAPTER  XV.     1876  to  1882 

Increased  Circulation.  Knox's  Reports.  Bank  Supervision.  Green- 
backers  oppose  Banks.  Interest  Rates.  Silver  Certificate 
Issues  and  Contraction  of  Bank-notes.  "  Lawful  Money  "  inter- 
preted. Act  extending  Bank  Charters.  Condition  of  all  Banks. 
Banking  Power  by  Sections 337 

CHAPTER   XVI.     1883  to  1890 

Crisis  of  1884.  Clearing-house  Certificates.  Bond  Redemptions 
cause  Contraction.  Reforms  suggested  to  increase  Elasticity. 
Cannon's  Plan.  Surplus  Revenue  in  Banks.  Stringency  of 
1890.  Statistics  of  Domestic  Exchange.  Important  Growth 
of  State  Banks.     Banking  Power  by  Sections  ....     349 


PART   III 

FROM  i8gi    TO    THE  PRESENT  DAY 

SILVER   CONTEST   OF   1896 

CHAPTER  XVII.     1891  to  1896 

The  Silver  Situation  Inflation  causes  Gold  Exports.  Silver  con- 
tinues to  fall.  Free  Coinage  Advocates  Active.  International 
Conference  of  1892.  Movement  for  State  Bank  Currency. 
Treasury  Deficits.  Gold  Reserve  impaired.  Crisis  of  1893. 
Cleveland  and  Carlisle.  Insufficiency  of  Revenue.  Currency 
Famine  and  Auxiliary  Currency.  Failures.  Silver  Purchases 
stopped.  Sales  of  Bonds  to  obtain  Gold.  "Coining  the 
Seigniorage."  Asset  Bank  Currency  advocated.  Morgan  Bond 
Syndicate.  Efforts  to  retire  Legal  Tender  Notes.  Bryan  and 
Free  Coinage.     Sound  Money  League.     McKinley's  Election   .     363 


XIV  CONTENTS 


THE   REFORM   ACT   OF   1900 

CHAPTER   XVIII.     1897  to  1902 

PAGE 

Silver  Influence  still  Potent.  Further  International  Negotiations. 
Gage  on  Gold  Standard  and  Currency  Reform.  Indianapolis 
Monetary  Convention.  Its  Comprehensive  Measure  of  Reform. 
Activity  of  Gold  Advocates.  Spanish  War  Finances.  Era  of 
Prosperity.  Gold  Standard  Law  of  1900.  Bryan  again  in 
Opposition.  McKinley  reelected.  Gage's  Plan  for  Elastic 
Currency.  Enormous  Industrial  Expansion.  Money  Stringency 
and  Treasury  Relief.  Shaw's  Policy  and  Recommendations. 
Silver  Abroad 395 

GENERAL   REVIEW 

CHAPTER  XIX 

The  Conditions  reviewed  historically.  Hamilton's  Coinage  Theories. 
The  Silver  Question  settled  by  Adoption  of  Gold  Standard. 
Status  of  Legal  Tender  Notes.  The  Bank-note  System.  Growth 
of  National  Banks.  Lack  of  Elasticity.  Other  Systems  com- 
pared. The  Subtreasury  Evil  and  the  Question  of  Public 
Money  Deposits 415 

PART   IV 

BIBLIOGRAPHY 

Official  and  Unofficial  Publications  on  the  Subject.  Colonial  and 
Continental  Period.  The  Period  prior  to  the  Civil  War.  Bank 
of  the  United  States.  Subtreasury  System.  Treasury  Notes. 
Period  after  the  Civil  War.  General  Subject.  The  Silver 
Question.  Legal  Tender  Notes.  Banking  and  Bank-notes. 
Miscellaneous 437 

PART   V 

APPENDIX 

The  Principal  Laws  relating  to  United  States  Banks,  Coinage,  Treasury 
Notes,  Public  Money  Deposits,  Legal  Tender  Notes,  National 
Banks  and  Silver 451 

Jefferson's  Notes  on  a  Coinage  System  ;  Hamilton's  Report  on  the 
Mint  ;  Jefferson's  Letter  approving  Hamilton's  Plan  ;  Hamil- 
ton's Report  on  a  National  Bank 5^3 


CONTEST  FOR  SOUND   MONEY 


INTRODUCTORY   CHAPTER 

Our  laws  with  reference  to  paper  currency  have 
been  largely  influenced  by  the  distribution  of  govern- 
mental authority  peculiar  to  the  United  States,  and 
entirely  separate  and  distinct  interests  have  thereby 
been  brought  in  antagonism  to  the  adoption  of  the 
most  desirable  currency  system. 

For  eighty-five  years  after  the  Declaration  of  Inde-  Economic 
pendence  the  United  States  as  a  nation  was  in  a  forma-  ^°tion™S  &t 
tive  period.  The  thirteen  colonies  had  organized  a  birth, 
confederacy  to  resist  oppression  from  abroad,  but  with 
insufficient  and  ill-defined  powers,  and  as  soon  as  they 
had  fought  to  a  successful  issue  and  been  recognized 
as  an  independent  nation,  they  began  to  be  jealous  and 
distrustful  of  the  powers  which  must  necessarily  be 
given  to  the  general  government  in  order  to  form  a  per- 
manent nation.  Oppressive  debt,  disorganized  business 
and  depreciated  currency  presented  grave  economic 
problems  for  solution,  at  a  time  when  the  greater  and 
graver  problem  of  creating  a  government,  based  upon 
the  consent  of  the  governed,  evidenced  by  popular  suf- 
frage, must  first  be  solved,  in  order  that  it  might  in 
turn  bring  order,  credit  and  prosperity  out  of  existing 
chaos.  The  colonies  were  held  together  by  the  co- 
hesive force  of  self-preservation  in  presence  of  the  arms 
of  a  powerful  and  aggressive  foe.  This  pressure  once 
removed,  the  tendency  toward  separate  action  and  asser- 


CONTEST  FOR  SOUND  MONEY 


Local   politi- 
cal jealousy. 


The 

State  Rights 

doctrine. 


tion  of  individual  interests  on  the  part  of  the  colonies 
became  pronounced. 

Tenacious  of  their  liberties,  the  people  were  greatly 
impressed  with  possible  danger  from  an  arbitrary  exer- 
cise of  power  on  the  part  of  a  central  government,  and 
in  framing  the  Constitution,  the  powers  of  the  several 
states  were  subordinated  to  the  national  government 
with  halting  jealousy  and  only  where  deemed  indispen- 
sable. The  Nation  was  thus  started  with  a  dual  sover- 
eignty. The  citizens  owed  allegiance  to  the  states  in 
which  they  lived  as  well  as  to  the  Nation,  and  the  re- 
spects in  which  each  was  paramount  were  as  to  many 
questions  left  in  the  realm  of  debate.  Seven  of  the 
original  thirteen  states  accompanied  their  ratification  of 
the  Constitution  with  proposed  amendments,  and  many 
states  seemed  to  regard  its  obligations  lightly.  With- 
drawal from  the  Union  was  freely  discussed  as  an 
alternative  and  by  no  means  impossible  remedy  for 
unsatisfactory  treatment. 

In  1798,  Kentucky,  roused  by  its  opposition  to  the 
alien  and  sedition  laws  passed  by  Congress,  adopted 
resolutions,  among  other  things,  reciting  that  the  gov- 
ernment was  created  by  a  compact  among  the  states  and 
"was  not  made  the  exclusive  or  final  judge  of  the  extent 
of  the  powers  delegated  to  itself,  but  that,  as  in  all 
other  cases  of  compact  among  powers  having  no  com- 
mon judge,  each  party  has  an  equal  right  to  judge  for 
itself  as  well  of  infraction  as  of  the  mode  and  measure 
of  redress."  Virginia  passed  similar  resolutions  in  1799. 
In  other  states  similar  doctrines  were  at  times  pro- 
claimed. 

If  the  House  of  Representatives,  the  Senate,  and  the 
President  concur  as  to  an  act  of  legislation,  it  becomes  a 
law.  If  any  question  as  to  its  constitutionality  arises, 
the  theory  of  the  Constitution  is  that  such  question  is  to 


INTRODUCTORY  CHAPTER  3 

be  determined  by  the  Supreme  Court,  thus  making  four 
separate  parties  whose  concurrence  is  necessary  before 
a  law  becomes  final  and  binding  beyond  question.  The 
Kentucky  resolutions  sought  to  introduce  a  fifth  party 
and  assert  that  each  state  as  a  party  to  the  compact  of 
federation  may  determine  for  itself  the  limitation  of 
power  which  the  general  government  possesses. 

This  doctrine,  in  all  its  refinement,  culminated  in  the  Nullification, 
nullification  ordinance  adopted  by  South  Carolina  in  No-  l832, 
vember,  1832,  in  which  it  declared  the  United  States  tariff 
law  "  null  and  void,  and  no  law,  nor  binding  on  this  state, 
its  officers,  or  citizens,"  and  no  duties  were  to  be  paid  in 
that  state  and  no  appeal  to  the  Supreme  Court  of  the 
United  States  was  to  be  permitted.  The  energetic  deter- 
mination of  President  Jackson  to  enforce  the  law,  coupled 
with  the  "  Clay  Compromise,"  a  modification  of  some 
of  the  law's  most  objectionable  provisions,  deferred 
but  did  not  settle  the  constitutional  issues  involved. 

The  status  of  slavery  in  the  Constitution  was  the  influence  of 
occasion  of  prolonged  controversy ;  and  as  finally  set-  slavery- 
tied,  the  importation  of  slaves  could  not  be  prohibited 
for  twenty  years,  and  three-fifths  of  the  slave  popula- 
tion was  to  be  counted  in  determining  the  basis  of  rep- 
resentation of  the  several  states  in  Congress  and  in 
the  Electoral  College.  Each  state  was  given  two  sen- 
ators, and  representatives  were  apportioned  according 
to  population.  The  number  of  votes  to  which  each 
state  is  entitled  in  the  Electoral  College,  which  chooses 
the  President  and  Vice-president,  is  equal  to  its  con- 
gressional representation,  that  is,  its  senators  and  repre- 
sentatives combined.  Allowing  three-fifths  of  the  slave 
population,  while  not  enjoying  the  suffrage,  to  be 
counted  in  determining  the  representative  population, 
gave  to  the  white  population  of  the  slave-holding  states 
a  preponderating  influence  in  national  affairs  which  was 


4  CONTEST  FOR  SOUND  MONEY 

bound  to  provoke  controversy.  In  laying  the  founda- 
tion of  the  Nation,  the  framers  of  the  Constitution  also 
laid  the  foundation  of  an  irrepressible  conflict,  and  the 
opposition  to  slavery  which  found  expression  in  the 
constitutional  debates  was  continued  with  growing  in- 
tensity, but  as  a  moral  rather  than  political  question. 
Its  abolition  in  the  northern  states,  owing  very  largely 
to  climatic  conditions,  as  well  as  for  ethical  reasons, 
made  the  question  of  slavery  a  sectional  one. 
Missouri  The  first  pronounced  conflict  arose  over  the  admission 

Com".  of  Missouri  as  a  state  in  1818-1819.     It  was  admitted  in 

promise.  ^# 

1 82 1  as  a  slave  state,  after  the  "  Missouri  Compromise  " 
(Act  of  March  2,  1820)  had  provided  that  slavery  should 
forever  be  excluded  from  all  territory  west  of  Missouri 
and  north  of  360  30'  north  latitude  (the  southern  boun- 
dary of  the  state).  In  1846  the  "  Wilmot  Proviso,"  an 
amendment  to  an  act  appropriating  money  with  which 
to  purchase  territory  from  the  government  of  Mexico, 
proposed  to  exclude  slavery  and  involuntary  servitude 
forever  from  all  territory  so  acquired.  It  was  adopted 
by  the  House,  but  later  reconsidered  and  defeated.  This 
episode  marked  the  formation  of  a  political  party,  whose 
avowed  and  direct  purpose  was  to  prevent  the  extension 
of  slavery  in  the  territories  of  the  United  States.  Their 
propaganda  was  followed  by  a  powerful  and  continuous 
onslaught  upon  the  institution  of  slavery  upon  moral 
and  religious  grounds,  and  created  a  strong  sentiment 
in  favor  of  its  abolition,  which  ultimately  became 
effective. 
Narrow  con-  Slavery,  involving  enormous  property  interests,  de- 
pended for  protection  upon  the  several  state  govern- 
ments, and  this  fact  all  along  gave  to  the  doctrine  of 
state  rights  and  "  state  sovereignty "  its  principal  ele- 
ment of  strength.  The  power  given  the  general  gov- 
ernment under  the  Constitution  was  rigidly  construed, 


struction  of 
Constitution. 


INTRODUCTORY  CHAPTER  5 

circumscribed  within  the  narrowest  limits,  and  any 
attempt  at  liberal  construction  or  enlargement  with 
reference  to  any  subject  was  tenaciously  fought  by  the 
champions  of  state  rights.  All  efforts  by  the  general 
government  to  regulate  banking  and  currency,  encoun-  • 
tered  this  opposition  in  all  its  virulence  as  well  as  that 
of  the  state  bank  interests. 

The  preservation  of  the  Union  is  traceable  to  the  fact  Nationaiiza- 
that  the  National  or  Federal  party  controlled  the  coun-  tlon  an<? 

r        J  prosperity. 

cils  of  government  during  its  earlier  years.  In  this 
connection  too  much  praise  cannot  be  bestowed  upon 
the  genius  and  statesmanship  of  Hamiltpn,  the  judicial 
wisdom  and  statesmanship  of  Marshall.  It  will  appear 
in  the  following  history  that  whenever  national  senti- 
ment and  national  influence  have  moulded  legislation  and 
controlled  the  general  government,  enhanced  prosperity 
ensued;  witness  the  periods  of  the  first  and  second 
United  States  banks  and  that  of  the  national  banking 
system.  Whenever  the  disintegrating  influence  in- 
volved in  the  doctrine  of  "  state  sovereignty "  has  been 
paramount,  adverse  conditions  have  prevailed ;  witness 
the  period  following  the  expiration  of  the  charter  of  the 
first  United  States  Bank  (181 1)  until  the  second  bank 
was  well  under  way,  and  the  period  between  the  ex- 
piration of  the  charter  of  the  second  bank  (1836)  and 
the  creation  of  the  national  banking  system  (1863). 

The  right  of  secession  and  the  doctrine  of  state  Nationalism 
sovereignty  as  it  had  been  proclaimed,  as  well  as  tnumPhs> 
slavery  itself,  were  buried  and  the  permanency  of  the 
Union,  the  paramountcy  of  the  general  government, 
proclaimed  as  the  verdict  of  the  Civil  War  (1861-1865). 
Spurred  by  "  military  necessity "  and  against  its  de- 
clared conviction  as  to  its  constitutional  power,  Con- 
gress asserted  in  1862  the  national  sovereignty  with 
reference   to   the   currency   question   by   issuing   legal 


CONTEST  FOR  SOUND  MONEY 


Confirmed 
by  Supreme 
Court. 


Currency 
system  still 
affected  by 
antagonism. 


tender  notes.  In  order  to  meet  current  liabilities  Con- 
gress issued  and  used  in  paying  such  indebtedness, 
notes  reading  on  the  face  "  The  United  States  will  pay 

the  bearer dollars,"  and  on  the  back  "  This  note 

is  a  legal  tender  at  its  face  value  for  all  debts  public 
and  private  except  duties  on  imports  and  interest  on  the 
public  debt."  These  notes,  in  addition  to  paying  the  cur- 
rent indebtedness  of  the  government,  went  into  general 
circulation  as  money  and  have  since  formed  an  impor- 
tant portion  of  our  circulating  medium. 

After  having  the  question  before  it  for  the  third  time, 
by  instalments,  as  it  were,  the  Supreme  Court  decided 
that  Congress  had  the  power  to  issue  full  legal  tender 
notes  at  any  and  all  times  in  its  discretion,  and  by  in- 
ference decided  that  all  sovereign  powers  pertaining  to 
government  were  reposed  in  Congress  except  where 
specially  prohibited.  This  decision  was  reached  in  1884 
after  nearly  a  century  of  national  existence. 

The  faults  of  our  currency  system  after  the  establish- 
ment of  the  national  banks  and  the  assaults  upon  the 
principles  of  sound  finance  continuing  in  various  forms 
up  to  the  close  of  the  presidential  election  in  1900, 
symbolize  the  same  contending  policies  which  had  ex- 
isted prior  to  the  Civil  War.  It  seems  strange,  while 
all  recognized  the  desirability  of  having  the  coinage 
regulated  by  the  central  government,  so  much  so  that 
the  power  was  given  exclusively  to  Congress  in  the 
Constitution,  thus  insuring  uniformity  throughout  the 
■  Nation,  that  there  should  not  have  been  an  equal  desire 
to  have  the  paper  currency  regulated  by  the  same  cen- 
tral authority  and  thus  likewise  made  uniform  and  good 
throughout  the  length  and  breadth  of  the  land.  Such, 
indeed,  was  the  design  of  Hamilton  and  Marshall ;  but 
the  matter  having  been  left  in  doubt  in  the  organic  law 
the  contrary  doctrine  became  ascendant  when  political 


INTRODUCTORY  CHAPTER  7 

exigencies  involved  the  question,  and  the  regulation  of 
paper  currency  was  for  years  left  to  the  different  states. 

There  is  always  difficulty  in  changing  existing  con- 
ditions when  by  so  doing  you  disturb  vested  interests 
and  interfere  with  established  business.  Precedent  and 
habit  are  important  factors  in  public  as  well  as  private 
affairs.  But  the  failure  earlier  to  appreciate  and  adopt 
a  national  system  of  paper  currency  can  only  be  ex- 
plained by  the  jealous  desire  on  the  part  of  the  states 
to  minimize  the  powers  of  the  general  government. 

Whether  it  be  a  great  university,  a  great  industrial  Nationaiiza- 
enterprise  or  a  great  nation,  successful  conduct  and  p^^ie" 
maximum  development  depend  upon  efficient,  intelli- 
gent central  control.  The  unity  of  the  Nation,  the 
paramount  sovereign  powers  of  the  central  government 
over  all  questions  except  as  clearly  limited  by  the  Con- 
stitution, have  been  settled  by  force  of  arms,  by  public 
sentiment,  by  law  and  judicial  interpretation. 

Naught  but  a  national  currency  will  now  be  tolerated. 
Such  a  currency  we  have,  and  the  problem  is  to  improve 
the  system  upon  lines  requisite  to  give  the  greatest  meas- 
ure of  utility  possible  and  make  the  currency  in  fact 
what  it  is  in  theory,  the  handmaiden  of  commerce  and 
the  cornerstone  of  prosperity.  The  experience  of  the 
past  yields  present  wisdom  and  future  guidance.  The 
experience  of  the  colonies  and  the  states  presents 
the  money  question  as  affecting  individuals  and  govern- 
ment in  every  conceivable  phase.  Sound  principle  and 
false  theory  are  wrought  out  in  the  fierce  fires  of  con- 
troversy and  proved  or  disproved  by  the  severe  test 
of  experience,  and  yield  their  lessons  of  value  for  all 
charged  with  the  duty  and  responsibility  of  citizenship. 

Sound  money  means  money  made  of  (or  unquestion- 
ably redeemable  in)  a  commodity  which  has  a  stable 
value  in  the  markets  of  the  world  independent  of  fiat. 


8  CONTEST  FOR  SOUND  MONEY 

What  is  Sound  money  as  applied  to  coin  means  money  wherein 

mone  ?  *ne  commercial  value  of  the  bullion  equals  its  coinage 
value.  Sound  money  as  applied  to  paper  or  token  money 
of  any  kind  means  that  which  is  redeemable  in  money 
wherein  the  commercial  value  of  its  bullion  equals  its 
coinage  value. 

The  term  "  sound  money  "  doubtless  originated  from 
the  auricular  test  commonly  applied  to  coins.  The 
counter  or  other  convenient  surface  offering  an  op- 
portunity, the  coin  is  dropped  thereon,  and  its  quality 
depends  upon  whether  the  resulting  ring  possesses  the 
true  sound  or  not. 

The  test  of  sound  money  varies  with  different  periods, 
and  is  determined  by  varying  conditions.  It  has,  how- 
ever, a  general  significance  easily  understood,  is  concise, 
cogent,  and  seems  to  have  found  a  permanent  place  in 
our  economic  literature. 


PART   ONE 
PERIOD  PRECEDING  THE  CIVIL  WAR 


I.   THE   COINAGE   SYSTEM 
CHAPTER    I 

1776  TO   I789 

The  American  colonies,  prior  to  the  confederation  in  Colonial 
1778,  had  almost  as  many  systems  of  money  as  there  sysems* 
were  distinct  colonies.  Inasmuch  as  the  majority  of 
the  inhabitants  were  of  British  birth  and  traded  chiefly 
with  the  mother  country  and  with  each  other,  the  mone- 
tary units  were  in  some  measure  similar,  although,  as 
frequently  occurs  in  colonies,  the  money  of  account  im- 
posed by  the  mother  country  differed  from  the  money 
in  actual  use. 

The  colonies  generally  reckoned  in  pounds,  shillings  Coins 
and  peace,  but  in  actual  transactions  other  coins,  chiefly 
the  Spanish  dollar  and  its  subdivisions,  constituted  the 
medium  of  exchange.  The  gold  coins  in  use  other 
than  British  pieces  were  the  French  guinea  and  pistole, 
the  Portuguese  moidore  and  Johannes  or  "joe,"  the  Span- 
ish doubloon  and  pistole.  Silver  coins  in  circulation 
other  than  British  were  the  French  crowns  and  livres 
and  the  Spanish  pieces,  the  latter  being,  as  before  stated, 
most  prevalent.1 

The  people  were  naturally  compelled  to  find  an  equiv- 
alence between  the  money  of  account  and  that  of  ex- 
change, and  hence  the  practice  of  reckoning  the  dollar 
at  so  many  shillings  obtained.     The  valuation  varied  in 

1  MS.  Reports,  Committee  on  Finance,  Continental  Congress,  Vol.  26; 
reprinted  in  International  Monetary  Conference,  1878,  p.  422. 

II 


12  CONTEST  FOR  SOUND  MONEY 

Rating  of  the  different  colonies.  In  what  is  known  as  New  England 
"shillings."  and  in  Virginia  the  dollar  was  six  shillings  ;  in  New  York 
and  in  North  Carolina  it  was  valued  at  eight  shillings ; 
in  Georgia  at  five ;  in  South  Carolina  at  thirty-two  and 
one-half ;  and  in  the  remaining  four  colonies  at  seven 
and  one-half.1 

The  "  shillings "  here  referred  to  evidently  differed 
in  value  and  were  not  in  fact  the  English  shillings,  for 
it  is  declared  in  a  law  of  Massachusetts  of  1750  (23d 
George  II.,  Chapter  V.)2  that  the  value  of  the  English 
shilling  was  equal  to  one  and  one-third  of  the  Massa- 
chusetts shillings.  The  "  shillings "  of  most  of  the 
other  colonies  must  have  been  worth  much  less,  there- 
fore, in  English  coin.  The  established  rate  of  exchange 
with  London  was  four  shillings  and  sixpence  to  the 
dollar. 
Jefferson's  Jefferson   stated  that  the  tenth  part  of   a   Spanish 

shilling.  dollar  was  known  as  the  "bit,"3  yet  in  states  other  than 

Virginia  the  term  was  applied  to  the  eighth  of  a  dollar, 
the  same  as  the  "York  shilling,"  and  to  this  day  in  the 
western  and  southwestern  sections  of  the  country  the 
quarter-dollar  is  called  "  two  bits." 

The  Continental  Congress  undertook  the  task  of  cre- 
ating a  uniform  system  out  of  this  apparent  chaos  at  a 
time  when  the  actual  currency  in  circulation  was  depre- 
ciated paper.  It  may  be  said  to  have  fixed  upon  the 
unit  finally  adopted  as  early  as  1775,  when  it  authorized 
the  issue  of  notes  payable  in  "Spanish  milled4  dollars" 
but  it  was  not  finally  specifically  determined  upon  until 
several  years  later. 

1  Report  of  Robert  Morris,  Superintendent  of  Finance,  Vol.  L,  p.  289. 

2  See  Appendix. 

8  Jefferson's  Notes  ;  Appendix. 

4  "  Milled  "  money  means  coins  struck  in  a  mill  or  coining  press  as  dis- 
tinguished from  those  produced  by  a  die  by  striking  it  with  a  hammer. 


THE  COINAGE  SYSTEM  1 3 

In  April,  1776,  the  Congress  appointed  a  committee 
of  seven  "to  examine  and  ascertain  the  value  of  the 
several  species  of  Gold  and  Silver  coins,  current  in  these 
colonies,  and  the  proportions  they  ought  to  bear  to 
Spanish  milled  dollars."1 

The  committee  reported,  in  September  following,  a  Rating  of 
resolution  fixing  such  values  for  the  several  kinds  of  ot  ercoins' 
coin  in  circulation,  under  which  the  English  shilling 
was  rated  at  two-ninths  of  a  dollar,  or  about  22§  cents, 
deduction  being  made  for  abraded  coins.  This  resolu- 
tion also  fixed  the  value  of  gold  bullion  at  $17  and  of 
silver  bullion  at  $i\  per  ounce  Troy,  thus  attempting  to 
establish  a  legal  ratio  between  gold  and  silver  of  15.3 
to  I.2 

The  Articles  of  Confederation  which  governed  the  Under  the 
colonies  now  known  as  the  United  States  were  adopted  confedera- 
in  1 778,  and  continued  in  force  during  the  remainder  of  tion. 
the  Revolution  and  until  1789,  when  the  present  Con- 
stitution went  into  operation.    Article  IX.  provided  that 

"The  United  States  in  Congress  assembled  shall  also  have 
the  sole  and  exclusive  right  and  power  of  regulating  the  alloy 
and  value  of  coin  struck  by  their  own  authority  or  by  that  of 
the  respective  states." 

Thus  the  states  retained  the  power  to  coin  money 
coordinately  with  the  Confederation,  but  the  power 
to  regulate  its  value  was  given  to  Congress. 

In  August,  1778,  after  the  adoption  of  the  Articles  of 
Confederation,  Congress  appointed  a  committee  with 
Robert  Morris  as  chairman,  to  consider  the  state  of  the 
money  and  finances  of  the  United  States.  Morris  was 
subsequently  appointed  Superintendent  of  Finance,  but 

1  Journal  Continental  Congress  ;  reprinted  in  International  Monetary 
Conference,  1878,  p.  419. 

2  MS.  Reports,  Committee  on  Finance ;  reprinted  in  International  Mon- 
etary Conference,  1878,  p.  422. 


H 


CONTEST  FOR  SOUND  MONEY 


Reports  on 
coins  and 
establish- 
ment of  a 
mint. 


Robert  Mor- 
ris's plan. 


apparently  no  definite  action  was  taken  until  January, 
1782,  when  he  was  instructed  to  prepare  for  Congress 
a  table  of  rates  at  which  the  various  foreign  coins  should 
be  received  at  the  Treasury  of  the  United  States.  On 
January  15  Morris  submitted  a  comprehensive  report1 
on  a  coinage  system,  in  which  he  pointed  out  the  need 
not  only  of  a  uniform  system  of  coins,  but  of  legal  tender 
provisions  as  well. 

After  discussing  the  ratio  of  silver  to  gold  and  the 
fluctuations  in  the  market  value  of  the  precious  metals, 
he  concluded  that  the  money  standard  for  the  United 
States  ought  to  be  affixed  to  silver.  He  favored  a 
coinage  charge,  urged  that  the  money  unit  should  be 
very  small,  and  that  the  decimal  system  be  established. 

After  suggesting  that  the  Spanish  dollar  had  under- 
gone the  least  change  in  intrinsic  value,  he  recommended 
a  money  unit  which  would  be  the  1440th  part  of  a  dollar, 
or  a  quarter  of  a  grain  of  pure  silver.  Such  a  unit  agreed 
without  a  fraction  with  all  the  differing  valuations  of  the 
dollar  in  the  several  states.  Of  these  units  he  proposed 
that  100  constitute  the  lowest  silver  coin,  to  be  called 
the  cent,  containing,  therefore,  25  grains  of  silver,  to 
which  he  proposed  adding  for  alloy  two  grains  of  cop- 
per ;  five  of  these  cents  to  constitute  a  piece  to  be  called 
the  quint;  and  ten,  or  one  thousand  of  the  original  units, 
a  piece  to  be  called  the  mark.  He  favored  a  ratio 
between  silver  and  gold  of  14^  to  1.  He  recommended 
the  establishment  of  a  mint  and  the  coinage  of  the  pieces 
suggested.  Congress  on  February  21,  1782,  approved 
this  recommendation  and  directed  Morris  to  report  a 
plan  therefor.2  This  was  the  first  action  toward  estab- 
lishing a  federal  mint. 

1  MS.  Reports,  Superintendent  of  Finance,  Vol.  I.  ;  reprinted  in 
International  Monetary  Conference,   1878,  p.  425. 

2  Journal  Continental  Congress ;  International  Monetary  Conference, 
1878,  p.  432. 


THE  COINAGE  SYSTEM  1 5 

In  December,  1782,  Morris  recommended  to  Congress 
a  resolution  fixing  a  valuation  of  foreign  coins,  meas- 
ured in  dollars,  in  order  to  prevent  their  exportation, 
thus  denuding  the  country  of  specie.  In  April,  1783, 
he  submitted  to  Congress  specimens  of  coins  prepared 
by  him,  and  asked  further  consideration  of  his  mint  and 
coinage  proposition.  Both  these  matters  were  referred 
to  a  committee,  which  did  not  report  for  some  time. 

Meanwhile  Jefferson  had  taken  up  Morris's  plan  for  Jefferson's 
a  coinage  system  and  submitted  a  substitute.1  He  plan" 
recommended  the  adoption  of  the  Spanish  dollar  as  the 
unit,  as  best  answering  all  requirements,  and  easy  of 
adoption  because  then  practically  in  general  use.  His 
system  comprised  a  gold  coin  of  ten  dollars,  the  unit 
or  dollar  of  silver,  the  tenth  of  a  dollar,  also  of  silver, 
and  the  one  hundredth  of  a  dollar  of  copper,  and  sup- 
plemental thereto  a  half  dollar,  a  double  tenth  (twenty 
cents),  and  a  twentieth  of  a  dollar.  He  criticised  Mor- 
ris's plan  as  less  easy  of  adoption  and  more  laborious 
in  operation  than  the  purely  decimal  system.  v 

As  to  the  contents  of  the  dollar,  he  recommended 
finding  the  average  weight  of  pure  silver  in  the  dollars 
then  in  use  and  adopting  the  resulting  weight,  to  be 
coined  at  a  fineness  of  eleven-twelfths.  He  proposed 
fixing  a  proportion  between  gold  and  silver  coinage  at  Jefferson  on 
the  average  ratio  of  the  nations  trading  with  the  United  theratl°- 
States,  which  would  probably  be  15  to  1  ;  also  that  the 
coins  provided  be  made  lawful  tender  unless  diminished 
in  weight. 

Jefferson's  paperwas  also  referred  to  a  committee,  which 
did  not,  however, reach  aconclusion  until  May,  1785.  Mor- 
ris had  meanwhile  retired  from  the  Finance  Department. 

In  general  the  committee  approved  Jefferson's  plan, 
regarding  Morris's  proposed  system  as  introducing  coins 

1  In  full  in  the  Appendix. 


i6 


CONTEST  FOR  SOUND  MONEY 


The  dollar 

unit 

adopted. 


altogether  unknown,  departing  from  the  national  mode  of 
keeping  accounts  and  preventing  rather  than  promoting 
uniformity.     The  system  recommended  was  as  follows  : 

Ratio  of  the  metals  1 5  to  1  ;  a  gold  piece  of  five  dol- 
lars ;  a  silver  dollar  or  unit,  containing  362  grains  of 
pure  silver;  50,  25,  10,  and  5  cent  pieces  of  silver;  all 
gold  and  silver  coins  to  be  eleven-twelfths  fine,  with  a 
coinage  charge  of  2  to  2\  per  cent ;  two  copper  coins  of 
one  cent  and  one-half  cent  respectively.1 

Action  upon  the  report  as  a  whole  was  postponed,  but 
in  July,  1785,  the  following  resolutions,  fixing  upon  three 
fundamental  propositions,  were  adopted  by  Congress  :  — 

"That  the  money  unit  of  the  United  States  of  America  be 
one  dollar." 

"  That  the  smallest  coin  be  of  copper,  of  which  200  shall  pay 
for  one  dollar." 

"  That  the  several  pieces  shall  increase  in  decimal  ratio." 2 

In  April,  1786,  the  Board  of  Treasury  submitted  to 
Congress  three  alternative  propositions  concerning  the 
weight  and  fineness  of  the  coinage  proposed,  as  exhib- 
ited in  the  table  below. 


WEIGHT  OF  PURE   METAL 


Silver  Dollar 

Gold  Dollar 

Ratio 

I. 

II. 
III. 

grains 

375-64 
350.09 

521-73 

grains 
24.6268 

23-79 

34.782 

15.253  to  I 
14.749  to  I 
15          to  1 

Congress  on  August  8,   1786,  passed  a  resolution3 
fixing  the  fineness  of  gold  and  silver  coins  at  eleven- 

1  MS.  Reports,  Committee  on  Finance,  Vol.  26;   International  Mone- 
tary Conference,  1878,  p.  445. 

2  Journal  Continental  Congress ;   International  Monetary  Conference, 
p.  448.  8  In  full  in  the  Appendix. 


THE  COINAGE  SYSTEM  17 

twelfths,  the  dollar  or  unit  to  contain  375.64  grains  of 
pure  silver  as  in  the  first  mentioned  of  the  propositions 
above.  It  provided  for  mills,  or  ioooths  of  a  dollar,  as 
the  lowest  money  of  account,  and  coins  as  follows :  half 
cents  and  cents  of  copper ;  dimes  or  tenths  of  a  dollar, 
double  dimes  (20  cents),  half  dollars  and  dollafs,  of 
silver ;  five  dollars  and  ten  dollars,  of  gold  ;  the  latter 
being  coined  at  24.6268  grains  pure  metal  to  the  dollar, 
thus  giving  the  ratio  15.253  to  1  as  above  stated.  The 
copper  coinage  was  to  be  at  the  rate  of  100  cents  for 
2.\  pounds  Avoirdupois  of  copper. 

Finally,  pursuant  to  a  report  of  the  Board  of  Treasury  The  Mint 
of  September  20,  1786,  Congress  on  October  16  of  that 
year  passed  the  ordinance  establishing  the  mint.1 

The  mint  price  of  standard  gold,  eleven-twelfths  (or 
.916I)  fine,  was  fixed  at  $209.77  and  of  standard  silver, 
of  the  same  fineness,  at  $13,777,  f°r  tne  pound  Troy, 
with  a  coinage  charge  of  2  per  cent,  giving  a  ratio  of 
15.22  to  1.  Deposits  of  gold  or  silver  were  to  be  paid 
for,  95  per  cent  in  gold  or  silver  and  5  per  cent  in  copper 
coin. 

The  act  never  became  fully  operative.  Only  copper 
coins  were  actually  struck  under  this  law,  and  these 
were  made  receivable  for  taxes  and  public  dues  to  the 
extent  of  5  per  cent  in  any  payment,  all  other  copper 
coins  being  excluded.  After  September  1,  1787,  foreign 
copper  coins  were  to  cease  to  be  current,  and  copper 
coins  struck  by  the  states  were  rated  by  weight  at  the 
value  fixed  by  the  coinage  law  of  August  8,  1786,  viz., 
100  cents  for  2\  pounds. 

The   financial  as  well  as  the  general  economic  con-  The  Federal 
dition  of  the  country  at  this  time  was  so  unsettled,  that 
it  became  obvious  to  most  of  the  leading  men  in  the 
colonies  that  a  more  stable  form  of  government  for  the 

1  The  important  parts  of  the  act  are  given  in  the  Appendix, 
c 


visions. 


1 8  CONTEST  FOR  SOUND  MONEY 

confederation  was  absolutely  necessary.  A  convention 
of  the  states  was  called  to  meet  in  Annapolis,  Md.,  in 
1786.  Nothing  came  of  this,  and  another  convention 
met  in  Philadelphia  in  1787.  Although  primarily 
assembled  to  consider  economic  questions,  the  deliber- 
ations of  the  convention  ultimately  produced  a  new  form 
of  government,  the  present  Constitution  (without  the 
amendments). 

Respecting  the  coinage  system  that  instrument 
provides 

The    consti-       Art.  i,  Sec  8.      "The  Congress  shall  have  Power  .  .  . 

I"!!™*1  pr°~       "  T°  c°in  Money,  regulate  the  Value  thereof,  and  of  foreign 
Coin." 

Sec.  io.  "No  State  shall  .  .  .  coin  Money;  make  any 
Thing  but  gold  and  silver  Coin  a  Tender  in  Payment  of  Debts." 

Thus  the  states  surrendered  the  right  to  coin  money, 
the  power  over  the  standard  becoming  an  exclusively 
federal  function. 

STATISTICAL  RESUME 

Commercial  Ratio  of  Silver  to  Gold 

Soetbeer's  Estimate  based  on  Hamburg  Prices 

1775  .  .  .  14.72  1779  .  .  .  14.80  1783  .  .  .  14.48  1787  .  .  .  14.92 

1776  .  .  .  14.55  l7%°  •  •  •  H-72  "784  •  .  .  14.70  1788  .  .  .  14.65 

1777  .  .  .  14.54  1781  .  .  .  14.78  1785  .  .  .  14.92  1789  .  .  .  14.75 

1778  .  .  .  14.68  1782  .  .  .  14.42  1786  .  .  .  14.96  1790  .  .  .  15.04 

Production  of  Gold  and  Silver 

The  most  reliable  data  respecting  the  world's  production 
of  gold  and  silver  toward  the  close  of  the  eighteenth  century 
give  the  following  annual  averages  :  — 


Dfxade 

Gold 

Silver 

1761-1780    

$13,761,000 
11,823,000 

$27,133,000 
36,540,000 

THE  COINAGE  SYSTEM  1 9 

No  reliable  data  for  annual  periods  are  available,  the  above 
estimates  being  conclusions  reached  by  Soetbeer  after  the  most 
exhaustive  study  of  the  subject  ever  attempted. 

The  evidence  all  tends  to  verify  the  general  conclusion  that 
the  production  of  gold  diminished  and  that  of  silver  increased, 
thus  accounting  for  the  fall  in  the  market  price  of  silver  as 
indicated  in  the  table  of  ratios. 

The  production  of  precious  metals  in  the  United  States  prior 
to  1800  was  insignificant  in  amount. 


CHAPTER   II 

I790  TO   183O 

The  new  form  of  government  was  nominally  put  into 
operation  on  March  4,  1789.  Actually  the  transition 
was  very  deliberate.  Washington  was  not  inaugurated 
as  President  until  April  30,  and  the  Treasury  Depart- 
ment was  not  provided  for  by  law  until  the  following 
September. 
Hamilton's  Alexander  Hamilton  was  the  first  Secretary  of  the 
Mint  report  Treasury,  an(j  soon  after  organizing  the  Department  set 
himself  the  task  of  establishing  a  comprehensive  federal 
monetary  system.  He  first  took  up  the  question  of  the 
public  debt,  then  the  establishment  of  a  banking  system, 
and  on  January  21,  1791,  presented  to  Congress  his 
justly  celebrated  report  upon  the  establishment  of  a 
mint  and  a  coinage  system  for  the  United  States.1 

He   examined   this   comprehensive   subject  in  all  its 
aspects  and  ramifications,  presenting  the  facts  and  argu- 
ments bearing  upon  both  sides  of  each  question,  and 
after  careful  analysis  reached  the  following  conclusions : 
The  unit.  i.    That  the  dollar,  because  it  had  been  in  actual  use 

as  the  measure  of  values  in  practically  all  of  the  states, 
was  the  most  suitable  unit  for  the  proposed  system ; 
that  it  was  of  the  utmost  importance  to  define  as  exactly 
as  possible  just  what  the  dollar  was,  in  order  that  neither 
debtors  nor  creditors  might  be  injuriously  affected.  The 
dollars  in  existence  varied  considerably,  Spain  having 
degraded  or  changed  the  standard  at  different  times. 
He  therefore  recommended  a  dollar  containing  371.25 

1  In  full  in  the  Appendix. 
20 


THE  COINAGE  SYSTEM  21 

grains   of    pure   silver,  as   best   expressing   the   actual 
average  value  of  the  coin  in  use. 

2.  That  the  decimal  system  was  of  demonstrated 
superiority  over  the  duodecimal  of  Great  Britain. 

3.  That  inasmuch  as  the  undervaluation  of  either 
metal  would  cause  its  exportation,  thus  shifting  the 
standard  to  the  other,  which  might  result  injuriously, 
and  since  it  was  very  desirable  to  have  coins  of  both 
metals  in  actual  use,  the  ratio  should  conform  as  nearly  The  ratio, 
as  possible  to  the  commercial  ratio,  rather  than  follow 

any  specific  European  precedent.     He  therefore  recom- 
mended the  ratio  of  15  to  1. 

4.  That  the  silver  dollar  was  the  equivalent  of  24.75 
grains  of  gold,  and  therefore  a  gold  dollar  containing 
that  quantity  of  metal  be  also  provided  for,  in  order 
that  there  might  be  a  unit  coin  in  each  metal. 

5.  That  the  fineness  of  the  coins  should  be  eleven- 
twelfths  or  -9i6|,  corresponding  with  the  British  stand- 
ard of  fineness  for  gold ;  the  alloys  being  for  gold  coins,  Alloy  and 
silver  and  copper;  for  silver  coins,  copper  only.  mint  charge. 

6.  That  no  mint  charge  should  be  imposed  upon  the 
bullion  brought  for  coinage,  the  cost  thereof  being  prop- 
erly a  general  charge  rather  than  one  to  be  imposed 
upon  specific  individuals,  and  to  impose  a  charge  might 
influence  prices  in  international  relations,  being  in  effect 
a  reduction  of  the  standard  of  the  coin,  as  compared 
with  bullion. 

7.  That  foreign  coins  should  be  permitted  to  circulate 
for   one    year,    that   thereafter   certain   foreign    pieces 
might  be  tolerated  for  another  year  or  two ;   anticipat- 
ing that  the  mint  would  be  prepared  to  provide  all  the  Foreign 
coin  needed,  he  concluded  that  after  three  years  the  use  co,ns- 
of  foreign  coins  should  be  prohibited. 

Hamilton's  report  was  reviewed  by  Jefferson,  who, 
in  a  short  letter,  expressed  concurrence  upon  the   bi- 


22 


CONTEST  FOR  SOUND  MONEY 


Coinage  Act 
of  1792. 


metallic  proposition  and  other  features  of  Hamilton's 
plan.1 

Congress  gave  Hamilton's  recommendation  attention 
and  passed  a  resolution  for  the  establishment  of  a  mint 
on  March  3,  1791,  but  it  was  not  until  April  2,  1792, 
after  being  spurred  by  President  Washington,  that  the 
act  establishing  a  coinage  system  was  finally  passed. 

In  general,  Hamilton's  recommendations  were  adopted, 
but  Congress  refused  to  provide  for  a  gold  dollar,  thus 
partly  destroying  Hamilton's  ideal  of  a  bimetallic  stand- 
ard, and  altered  the  fineness  of  the  silver  coins  by  sub- 
stituting a  fraction  resulting  in  . 892,43.2  In  all  other 
particulars  the  law  was  practically  an  enactment  of 
Hamilton's  own  language  into  a  statute. 

The  act,3  after  providing  for  the  organization  of  the 
mint  directs,  in  Section  9,  the  coinage  of  the  following 
pieces :  — - 


Weight 

in  Grains 

Denominations 

Gross 

Fine 

Gold 

Eagles,  $10 

270 

247l 

Half  Eagles,  $5 

«35 

I23f 

Quarter  Eagles,  $2\ 

67f 

6l| 

'Dollars  or  Units 

416 

37»A 

Half  Dollars 

208 

185,* 

Quarter  Dollars 

104 

92H 

Dismes 

4if 

37A 

I  Half  Dismes 

2°i 

18& 

/  Cents 

I  Half  Cents 

264 

264 

132 

132 

Section  10  provides  for  devices  on  coins. 
Ratio  15  to  1.       Section  11  fixes  the  ratio  at   15   to   1,  the  language 
being 


1  See  Appendix.     2  It  is  not  clear  why  this  was  adopted.     8  See  Appendix. 


THE  COINAGE  SYSTEM  23 

"That  the  proportional  value  of  gold  to  silver  in  all  coins 
which  shall  by  law  be  current  as  money  within  the  United  States, 
shall  be  as  15  to  1,  according  to  quantity  in  weight,  of  pure 
gold  or  pure  silver  ;  that  is  to  say,  every  15  pounds'  weight 
of  pure  silver  shall  be  of  equal  value  in  all  payments,  with  1 
pound  weight  of  pure  gold,  and  so  in  proportion  as  to  any 
greater  or  less  quantities  of  the  respective  metals." 

Section  12  fixes  the  standard  of  fineness  for  the  gold 
coins  at  eleven-twelfths,  the  British  standard,  equal  to 
•9i6§,  the  alloy  to  be  silver  and  copper,  not  to  exceed 
one-half  of  the  former  metal. 

The  fineness  of  the  silver  coins  was  by  Section  13 
fixed  at  1485  parts  pure  metal  and  179  parts  copper 
alloy,  equal  to  .892,43.1 

No  charge  was  imposed  for  coining  the  bullion 
brought  to  the  mint,  unless  the  depositor  preferred  to 
have  payment  immediately,  instead  of  awaiting  the 
coinage  of  the  bullion,  in  which  case  a  deduction  of 
one-half  of  one  per  cent  was  to  be  made.  A  strict 
provision  against  giving  preference  to  depositors  was 
included  in  Section  15. 

Section   16  declared  that  the  gold  and  silver  coins 
provided  for  "  shall  be  a  lawful  tender  in  all  payments  Legal 
whatsoever,"  abraded  coins  to  be  legal  tender  for  the  tender- 
relative  weight  thereof. 

After  prescribing  directions  for  the  officers  and  im- 
posing the  penalty  of  death  for  fraudulently  debasing 
the  coinage  or  embezzlement,  on  the  part  of  such  officers, 
the  act  concludes  (Sec.  20)  with  the  provision  that  "the 
money  of  account  of  the  United  States  shall  be  expressed 

1  It  appears  that  notwithstanding  the  statute,  the  first  and  second  direc- 
tors of  the  mint  coined  dollars  at  the  fineness  of  .900,  thus  giving  them 
374.4  grains  of  pure  metal.  This  appears  to  have  been  tacitly  sanctioned 
by  both  Jefferson  and  Hamilton.  The  ratio  was  thus  altered  to  15J 
to  1.  See  White's  Report,  No.  496,  22  Congress,  1st  Sess.,  p.  17;  quoted 
by  Watson,  Hist,  of  Amer.  Coinage,  p.  230. 


tallic  law. 


24  CONTEST  FOR  SOUND  MONEY 

in  dollars,  dismes  or  tenths,  cents  or  hundredths,  and 
milles  or  thousandths,"  and  the  accounts  of  public  offi- 
cers were  to  be  kept  and  proceedings  of  courts  to  be 
had  accordingly. 

When  the  act  first  passed  the  Senate  it  provided  for 
an  impression  on  the  coins  of  the  head  of  the  President 
for  the  time  being,  in  imitation  of  the  coinage  of  most 
European  countries.  This  proviso  was  stricken  out  in 
the  House  of  Representatives,  and  after  some  discussion 
the  Senate  concurred. 

Much  to  Hamilton's  chagrin  the  business  of  the  mint 
was  attached  to  the  Department  of  State,  under  Jeffer- 
son, and  not  until'  after  Hamilton,  when  resigning,  called 
attention  to  this  anomaly,  was  it  transferred  to  the 
Treasury  Department.1 
First  bime-  This  legislation  based  upon  the  report  of  Hamilton 
was  the  first  attempt  in  the  world  to  adopt  by  law  a 
bimetallic  standard  with  all  the  requisite  features  of 
free  and  unlimited  coinage  of  both  metals  and  giving 
full  legal  tender  power  to  both. 

Hamilton's  conception  of  the  proper  ratio  was  not 
far  out  of  the  way,  as  is  shown  by  the  table  giving  the 
commercial  ratio  for  the  period.  Hamilton  was  not 
aware  that  the  relative  production  of  silver  was  increas- 
ing, so  that  the  commercial  ratio  would  very  soon  be 
changed,  and  naturally  when  in  1803  France  adopted 
a  ratio  of  1 5  J  to  1  the  disappearance  of  gold  from  this 
country  resulted.  It  was  thus  early  in  the  history  of 
the  United  States  demonstrated  that  it  was  impossible 
to  maintain  independently  a  ratio  between  the  metals 
differing  materially  from  that  fixed  by  the  world's 
markets. 

On  May  8,  1792,  Congress  passed  an  act  providing 
for  the  purchase  of  150  tons  of  copper  for  the  coinage 

1  Life  of  Hamilton,  Vol.  VI.,  p.  186. 


THE  COINAGE  SYSTEM  25 

of  cents  and  half  cents,  and  that  when  $50,000  of  these  Coinage 
pieces  had  been  struck,  public  notice  be  given  that  after 
six  months  from  that  date  no  other  copper  pieces  were 
to  pass  current,  or  be  offered,  paid,  or  received  in  pay- 
ment for  any  debt,  etc.,  under  penalty  of  forfeiture  and 
fine,  recoverable  by  the  informer. 

The  first  coins  were  struck  in  October,  1792,  being  a 
small  amount  of  half  dimes,  referred  to  in  President 
Washington's  address  to  Congress  at  its  following 
session  :  — 

"  There  has  also  been  a  small  beginning  in  the  coinage  of 
half-dismes,  the  want  of  small  coins  in  circulation  calling  for  the 
first  attention  to  them." 

The  weight  of  the  copper  coins  was  reduced  by  the  other  coin- 
act  of  January  14,  1793,  to  208  and  104  grains  respec-  aselaws- 
tively.     By  the  act  of  March  3,  1796,  further  reduction 
in   weight    by    proclamation     of    the     President    was 
authorized. 

Sundry  other  acts  relating  to  the  mint  and  coinage 
were  passed  prior  to  the  general  revision  of  1834.  It  is 
necessary  to  note  only  the  following :  — 

March  3,  1796,  authorizing  a  charge  upon  bullion  de- 
posited for  coinage  if  below  the  standard. 

April  24,  1800,  March  3,  1823,  and  May  19,  1825, 
further  providing  for  charges  upon  bullion  deposits  not 
suitable  for  immediate  coinage,  whether  above  or  below 
the  standard. 

It  was  not  until  February  9,  1793,  that  Congress  Valuation  of 
modified  the  existing  valuations  of  foreign  coins.1  From  c°^n'fn 
and  after  the  first  of  July  following  the  date  of  the  act, 
British  and  Portuguese  gold  pieces  were  to  pass  current 
and  be  legal  tender  at  the  rate  of  100  cents  for  every  27 
grains'  weight,  French  and  Spanish  gold  pieces  at  100 
cents  for   27I   grains,  the  difference  being  due  to  the 

1  Fixed  by  tariff  law  of  July  31,  1789. 


26 


CONTEST  FOR  SOUND  MONEY 


Their  use 
limited. 


Legal 
tender  of 
foreign 
coins  con- 
tinued. 


greater  fineness  of  the  gold  coin  of  the  first-mentioned 
countries.  Silver  coins  were  rated  as  follows :  the 
Spanish  dollar  if  weighing  17  pennyweight  7  grains,  at 
100  cents,  and  proportionately  for  smaller  coins  ;  French 
crowns  at  no  cents,  if  weighing  18  pennyweight  17 
grains,  and  proportionately  for  parts  of  a  crown.1 

It  provided  further,  that  after  three  years  from  the 
date  of  the  beginning  of  the  coinage  of  gold  and  silver 
at  the  mint  (to  be  proclaimed  by  the  President)  no  for- 
eign coins  except  the  Spanish  dollar  and  parts  thereof2 
were  to  be  legal  tender.  Other  foreign  coins  received 
by  the  United  States  thereafter  were  to  be  recoined  into 
coins  prescribed  by  the  mint  act. 

The  coinage  of  the  mint  was  not  sufficiently  large, 
however,  to  provide  for  the  country's  needs,  and  accord- 
ingly the  above-mentioned  act  giving  legal  tender  power 
to  foreign  gold  and  silver  coins  was  renewed  without 
change  by  the  acts  of  February  1,  1798,  and  April  10, 
1806.3 

The  act  of  April  29,  18 16,4  again  continued  the  pro- 
vision for  three  years,  including  the  French  five-franc 
pieces ;  this  was  again  continued  by  the  act  of  March  3, 
1 8 19,  until  November  1,  18 19,  for  gold  coins  (after 
which  date  they  were  no  longer  legal  tender)  and  until 
April  29,  1821,  for  the  French  silver  coins.  The  act 
of  March  3,  1821,  continued  the  same  provision  as  to 
the  French  pieces  for  two  years  more,  and  the  act  of 
March  3,  1823,  for  four  years  from  that  date.  On  the 
same  day,  foreign  gold  coins  were  made  receivable  in 
payment  for  public  lands,  in  order  to  facilitate  their 
sale  to  immigrants. 


1  See  Appendix. 

2  Subsequent  legislation  did    not  alter  this  proviso;   thus  the  Spanish 
dollar  and  its  subdivisions  continued  legal  tender  until  1857. 

3  See  Appendix.  4  Ibid. 


THE  COINAGE  SYSTEM  27 

Notwithstanding  this  action  favorable  to  foreign  coin 
and  notwithstanding  a  substantial  supply  of  gold  came 
from  the  Spanish  and  French  traders  in  the  southwest, 
enabling  the  mint  to  coin  considerable  sums  annually,  Gold 
the  exports  of  gold  practically  drained  the  country  of 
that  metal.  During  the  third  decade  of  the  nineteenth 
century  it  disappeared  from  circulation. 

This  movement  was  stimulated,  not  only  by  the 
French  coinage  law  of  1803,  which  fixed  a  ratio  of  \^\ 
to  1,  but  also  by  the  conditions  during  the  War  of  1812 
and  the  adoption  of  the  gold  standard  by  England  in 
1 8 16,  with  a  subsidiary  silver  coinage  at  the  ratio  of  16 
to  1. 

During  a  considerable  period  after  the  refusal  to 
renew  the  charter  of  the  first  bank  of  the  United 
States,  depreciated  paper  was  the  chief  currency,  —  a 
condition  not  remedied  until  after  the  second  bank  was 
chartered  in  18 16. 

Respecting  silver,  the  country  was  not  much  more  Silver  also 
fortunate,  for  although  the  mint  was  turning  out  large  expor 
amounts  of  the  new  coinage,  the  actual  specie  in  use 
continued  to  be  Spanish  piastres  (or  dollars),  and  the 
subdivisions  thereof,  as  a  rule  much  cheapened  by  abra- 
sion. Although  somewhat  less  in  weight  than  the  Span- 
ish pieces,  the  American  dollars  were  accepted  by  tale 
throughout  the  West  Indies  and  were  exported  for  that 
reason.  Spanish  and  Mexican  pieces  were  imported, 
and  those  of  full  weight,  or  nearly  so,  were  recoined 
into  dollars  at  the  mint,  the  depositors  reaping  the 
profit. 

President  Jefferson  undertook  to  check  this  business  Dollar  coin- 
in  1806  by  directing  that  the  mint  suspend  the  coinage  pfndseuds 
of  the  dollar  pieces.      This  suspension  continued  until 
after  the  legislation  of  1834.     A  similar  fate  befell  the 
fractional  coins,  which  were  equally  valuable  for  export, 


28  CONTEST  FOR  SOUND  MONEY 

and  the  result  was  that  the  Americans  were  coining  for 
other  people  while  actually  using  worn  foreign  coin. 

The  evils  of  the  disordered  metallic  currency  grew 
intolerable,  and  Congress  became  impressed  with  the 
necessity  for  action.  In  consequence,  numerous  reports 
were  prepared  and  laid  before  that  body,  but,  as  will 
appear,  no  action  was  taken  until  1834. 

In  1817  the  Senate  requested  John  Quincy  Adams, 
then    Secretary   of    State,    to    prepare    a   report    upon 
weights  and  measures,  which  was  not,  however,  sub- 
mitted until  1 82 1. 
J-  Q-  In  connection  with  the  general  subject  Adams  dis- 

Adams's  re-  .     ,  .  ,....,  ... 

port  cussed  the  coinage  system,1  prefacing  it  with  a  criticism 

of  the  law  fixing  the  par  of  exchange  for  the  pound 
sterling  at  $4.44,  when  in  fact  the  value  of  the  pound 
was  $4.56572  in  gold,  and,  owing  to  the  demonetization 
and  lower  rating  of  silver  in  England,  $4.3489  when 
reckoning  in  the  white  metal.  It  is  not  necessary  to 
follow  and  verify  Adams's  calculations ;  suffice  it  to  say 
that  this  very  low  rating  of  the  pound  served  to  em- 
barrass transactions  involving  international  exchange. 

Adams  also  pointed  out  that  the  ratings  in  the  acts 
governing  the  valuations  of  foreign  coins  were  inaccu- 
rate. He  did  not  discuss  the  question  of  the  ratio 
specifically,  but  provided  those  who  desired  to  do  so 
valuable  and  accurate  material  relative  to  the  weights 
of  coins.  The  inevitable  deduction  from  the  facts  he 
presented  and  his  reasoning  based  thereon  is  that  he 
regarded  the  ratio  very  much  at  fault. 

Although  not  free  from  errors,  Adams's  paper  shows 
great  labor  and  research  upon  a  subject  concerning 
which  at  that  time  very  little  material  was  available  to 
the  student. 

In  the  meantime  the  House  of  Representatives  had 

1  See  International  Monetary  Conference,  1878,  p.  490. 


THE   COINAGE  SYSTEM  29 

referred  to  a  committee  the  question  "  whether  it  be 
expedient  to  make  any  amendment  in  the  laws  which 
regulate  the  coin  of  the  United  States  and  foreign  coins 
respectively,"  which  reported,  January  26,  1819,  a  bill 
recommending  that  the  gold  coins  be  reduced  in  weight 
from  24.75  grains  to  22.798  grains,  that  a  seigniorage 
of  14.85  grains  pure  silver  to  the  dollar  be  charged  for 
coinage,  and  that  the  legal  tender  of  silver  coin  below 
the  dollar  be  limited  to  five  dollars.  This  is  the  first 
suggestion  that  fractional  silver  be  made  subsidiary. 

After   discussing   the   various   ratios    prevailing,  the  Lack  of 
report  concludes  as  follows  :  —  specie. 

"  As  the  committee  entertain  no  doubt  that  gold  is  estimated 
below  its  fair  relative  value,  in  comparison  to  silver,  by  the 
present  regulations  of  the  Mint;  and  as  it  can  scarcely  be 
considered  as  having  formed  a  material  part  of  our  money 
circulation  for  the  last  twenty-six  years,  they  have  no  hesitation 
in  recommending  that  its  valuation  shall  be  raised,  so  as  to 
make  it  bear  a  juster  proportion  to  its  price  in  the  commercial 
world.  But  the  smallest  change  which  is  likely  to  secure  this 
object  (a  just  proportion  of  gold  coins  in  our  circulation)  is  that 
which  the  committee  prefer,  and  they  believe  it  sufficient  to  re- 
store gold  to  its  original  valuation  in  this  country,  of  1  to  i5TV" * 

The  coinage  charge  imposed  by  this  bill  would  have 
made  the  ratio  of  the  bullion  actually  15  to  I.  Con- 
gress, however,  took  no  action. 

On  March  1,  18 19,  the  House  directed  Crawford, 
Secretary  of  the  Treasury,  to  report,  among  other  mat- 
ters, "  such  measures  as,  in  his  opinion,  may  be  expedi- 
ent to  procure  and  retain  a  sufficient  quantity  of  gold 
and  silver  coin  in  the  United  States." 

A  very  able  state  paper  was  prepared  by  Crawford  in  Crawford's 
response  to  this  resolution  and  presented  to  the  House  r  p 
in  February,  1820.2 

1  Abridgment  of  Debates,  Vol.  6,  p.  273. 

2  See  International  Monetary  Conference,  1878,  p.  502. 


30  CONTEST  FOR  SOUND  MONEY 

He  argued  that  the  difference  of  i  per  cent  be- 
tween the  Spanish  and  American  dollar  would  have 
retained  the  latter  in  circulation  if  the  former  had  not 
been  made  legal  tender.  In  discussing  the  ratio  he 
correctly  alleged  that  the  derangement  was  due  to  the 
appreciation  of  gold,  and  urged  that  no  injustice  would 
result  from  a  change  in  the  ratio  which  would  make  it 
correspond  to  the  market  value.  He  recommended  the 
ratio  of  15.75  to  l  as  Dest  calculated  to  correct  the  dis- 
parity, as  it  would  cause  the  importation  and  retention 
of  gold,  and  would  not  cause  silver  to  go  out  unless  the 
state  of  the  foreign  .trade  warranted.  Upon  the  other 
hand  he  pointed  out  that  the  retention  of  a  metallic  cur- 
rency was  dependent  upon  the  volume  of  paper  currency 
in  use  (a  subject  also  discussed  in  his  report),  that  in 
fact  the  value  of  gold  and  silver  had  been  materially 
affected  by  the  general  use  of  paper  in  leading  countries, 
followed  by  the  suspension  of  specie  payments,  and  sub- 
sequently by  efforts  to  resume. 

Crawford's  report  was  referred  to  a  select  committee 
which  in  February,  182 1,  reported  conclusions  agreeing 
with  his.  It  was  pointed  out  that  a  gold  coinage 
amounting  to  $6,000,000  had  practically  disappeared 
from  use,  that  this  was  unquestionably  due  to  the  ratio 
Change  of  of  1 5  to  i  under  which  the  gold  coins  were  more  valua- 
ble for  export  than  for  home  use,  the  difference  being 
about  sixty  cents  upon  every  $15  or  three  half  eagles. 

Secretary  Crawford,  in  a  letter  to  a  committee  of  the 
House  of  Representatives  in  February,  1823,  apparently 
modified  his  view  as  to  the  ratio  somewhat.     He  said  :  — 

"  In  terminating  this  letter  I  feel  it  my  duty  to  observe  that 
the  relative  current  value  of  gold  and  silver  differs  materially 
from  that  established  by  the  laws  of  the  United  States.  The 
consequence  has  been  that  the  gold  coin  of  the  United  States 
has  always  been  exported  whenever  the  rate  of  exchange  be- 


ratio  dis 
cussed. 


THE   COINAGE  SYSTEM  3 1 

tween  the  United  States  and  the  commercial  nations  of  Europe 
has  been  in  favor  of  the  latter.  If  the  gold  coins  of  the  United 
States  should  be  made  equal  in  value  to  sixteen  times  the  value 
of  silver  coins  of  the  same  quantity  of  pure  silver,  they  would 
be  exported  only  when  the  rate  of  exchange  should  be  greatly 
against  the  United  States." * 

In  a  report  submitted  to  the  House  by  a  committee  Specie  in  the 
having  under  consideration  the  valuation  of  foreign  countr>r- 
coins,  in  1823,2  it  is  stated  that  the  coinage  of  gold  and 
silver  at  the  mint  had  been  in  excess  of  $20,000,000, 
whereas  the  amount  of  specie  in  the  country,  inclusive 
of  foreign  coin,  was  estimated  at  $16,000,000  (less  by 
$1,500,000  than  in  1804),  and  by  far  the  greater  part  of 
the  coin  in  the  country  consisted  of  French  silver  pieces, 
which,  it  will  be  recalled,  had  full  legal  tender  power. 
It  was  upon  the  recommendation  of  this  committee  that 
this  power  was  continued  until  1827. 

In  the  Senate  at  about  the  same  time  (January,  18 19) 
the  Finance  Committee  had  reported  upon  a  resolution 
as  to  the  "  expediency  of  prohibiting  by  law  the  exporta-  Prohibiting 
tion  of  gold,  silver,  and  copper  coins,"  concluding  that  !estedSSUg 
it  was  not  expedient.     Three  quotations  from  this  report 
are  of  interest :  — 

"  Of  the  inefficiency,  if  not  entire  impotence,  of  legislative 
provisions  to  prevent  the  escape  of  the  precious  metals  beyond 
the  territorial  limits  of  the  Government,  the  history  of  all 
countries  in  which  the  power  of  legislation  has  been  thus  exer- 
cised, bears  testimony.  .  .  .  Indeed,  no  error  seems  more 
entirely  renounced  and  exploded,  if  not  by  the  practice  of  all 
nations,  at  least  in  the  disquisitions  of  political  economists,  than 
that  which  supposed  that  an  accumulation  of  the  precious 
metals  could  be  produced  in  the  dominions  of  one  sovereign 
by  regulations  prohibiting  their  exportation  to  those  of  any 
other.  ...  In  short,  it  is  the  opinion  of  your  committee, 
that  commerce  is  always  destined  to  flourish  most  where  it  is 

1  Abridgment  of  Debates,  Vol.  7,  p.  429.  2  Ibid.,  p.  427. 


32 


CONTEST  FOR  SOUND  MONEY 


permitted  to  pursue  its  own  paths,  marked  out  by  itself,  em- 
barrassed as  little  as  possible  by  legislative  regulations  or 
restrictions." 1 

For  more  than  a  decade  this  question  had  thus  been 
before  Congress  without  definite  progress  toward  the 
adoption  of  a  remedy.  Meanwhile  the  opposition  to  the 
bank  of  the  United  States  (described  in  a  later  chapter), 
had  begun,  and  materially  interfered  with  calm,  deliber- 
ate action. 

STATISTICAL   RESUME 

Commercial  Ratio  of  Silver  to  Gold 

Soetbeer's  Estimate  based  on  Hamburg  Prices 


1793 
1794 
1795 
1796 
1797 
1798 
1799 
1800 
1801 


15.00 
15-37 
15-55 
I5-65 
15.41 

'5-59 
15-74 
15.68 
15.46 


1802 
1803 
1804 
1805 
1806 
1807 
1808 
1809 
1810 
1811 


15.26 
I5-4I 
I5-4I 
15-79 
I5-52 
15-43 
16.08 
15.96 
15-77 
'5-53 


1812 
1813 
1814 
1815 
1816 
1817 
1818 
1819 
1820 
1821 


16.11 
16.25 
15.04 
15.26 
15.28 
15. 11 
15-35 
15-33 
15.62 

»5-95 


1822 
1823 
1824 
1825 
1826 
1827 
1828 
1829 
1830 


15.80 
15.84 
15.82 
!5-70 
I5-76 
*5«74 
I5-78 
I5-78 
15.82 


Production  of  Gold  and  Silver 


World 

United  States 

Gold 

Silver 

Gold 

Silver 

1801-1810    . 
1811-1820    . 
1821-1830    . 

$  118,152,000 
76,063,000 
94,479,000 

$371,677,000 
224,786,000 
191,444,000 

$715,000 

Insignifi- 
cant 

1  Abridgment  of  Debates,  Vol.  6,  p.  190. 


THE  COINAGE  SYSTEM 


33 


Coinage  of  the  United  States 


Years 

Total  Gold 

Silver  Dollars 

Fractional  Silver 

i 792- i 795    .    . 

$71,485.00 

$204,791.00 

$  165,892.80 

1 796- 1 800 

942,805.00 

1,052,667.00 

l7,I03-95 

1801-1805 

1,533.267.50 

182,059.00 

287,889.00 

1806-1810 

1,717,475.00 

3,099,217.25 

1811-1815 

l,345>925-00 

2,622,316.50 

1816-1820 

1,820,585.00 

3.348,49445 

1821-1825 

600,315.00 

5,844,178.95 

1826-1830 

1,302,777.50 

10,936,868.00 

Imports  and  Exports  of  Gold  and  Silver,  United  States 

Prior  to  1821  the  commercial  movement  of  precious  metals  was  not 
separately  reported;  nor  were  the  exports  and  imports  of  silver  correctly 
given  separate  from  gold,  until  1864. 


Years 

Imports 

Exports 

$31,062,367 
38,081,413 

$  43,472,833 
28,065,712 

CHAPTER   III 

183O  TO   i860 


Further 
efforts  to 
adjust  the 
double 
standard. 


Ingham's  re- 
port. 


The  ratio  existing  during  the  period  from  1820  to 
1830,  by  consensus  of  opinion,  undervalued  gold.  The 
only  differences  of  opinion  related  to  the  proper  ratio 
to  be  adopted  and  the  correlated  question  whether  gold 
or  silver  should  be  the  standard. 

On  May  4,  1830,  Secretary  Ingham,  of  the  Treasury, 
in  response  to  a  resolution  of  the  Senate  of  December 
20,  1828,  requiring  him  to  "ascertain,  with  as  much 
accuracy  as  possible,  the  proportional  value  of  gold  and 
silver  in  relation  to  each  other ;  and  to  state  such  altera- 
tions in  the  gold  coins  of  the  United  States  as  may  be 
necessary  to  conform  those  coins  to  the  silver  coins,  in 
their  true  relative  value,"  presented  a  report  upon  the 
subject  containing  the  most  thorough  and  exhaustive 
treatment  it  had  received  up  to  that  date. 

He  insisted  that  the  loss  of  gold  by  the  country  was 
by  no  means  entirely  due  to  the  undervaluation  in  ratio. 
He  adduced  the  fact  that  prior  to  1821  the  market  value 
in  the  United  States  had  not  varied  materially  from  the 
mint  value,  and  contended  that  the  introduction  of  bank 
paper  had  been  the  chief  cause  of  the  exportation  of 
gold.  He  argued  that  the  exportation  of  gold  alone  did 
not  cause  serious  trouble,  but  that  actual  distress  ensued 
when  silver  also  went  abroad,  leaving  the  country  inade- 
quately supplied.  He  set  forth  with  great  force  the 
futility  of  endeavoring  to  maintain  a  bimetallic  standard, 
and  urged  the  adoption  of  a  single  standard,  and  that 

34 


THE   COINAGE  SYSTEM  35 

silver.  He  favored  silver  because  contracts  in  the  coun- 
try had  been  for  many  years  based  upon  the  silver  dol- 
lar, and  also  because  no  exact  adjustment  of  the  relation 
of  the  two  metals  could  be  maintained  with  any  degree 
of  permanence,  and  silver  could  be  retained  at  home  by 
reducing  the  mint  value  of  gold.  The  country  could 
not  possibly  get  along  without  silver,  whereas  it  could 
without  gold  by  the  use  of  sound  bank  currency.  As 
to  the  ratio,  he  suggested  that,  since  the  market  ratio 
appeared  to  be  about  15.8  to  1,  and  it  was  desirable 
under  his  plan  to  have  gold  at  a  slight  premium,  the 
coinage  ratio  should  be  15.625  to  1. 

Secretary  Ingham  addressed  many  persons  familiar 
with  the  subject,  for  information,  and  he  thus  obtained 
much  valuable  material  which  was  published  with  his 
report.1 

Gallatin,  who  had  been   Secretary  of  the  Treasury  Gallatin's 

views. 

under  Jefferson,  contributed  a  lengthy  letter  and  statis- 
tical information.  He  favored  the  adoption  of  the 
French  bimetallic  system,  ratio  15^  to  1,  with  coins 
.900  fine.  He  criticised  the  English  single  gold  stand- 
ard, with  its  "  adulterated  silver  currency,"  but  not  with 
his  usual  perspicacity.  His  general  conclusion  was  that 
the  bimetallic  standard  should  be  adopted  for  the  reason 
that  the  fluctuations  of  gold  and  silver  would  be  less 
than  that  of  one  metal  only.  If  a  single  standard  were 
selected,  silver  was  preferable  to  gold  because  it  was 
then  the  existing  standard  metal,  was  more  abundant, 
requiring  a  greater  premium  before  it  could  be  exported, 
and  was  the  only  means  of  suppressing  small  notes,  the 
worst  form  of  paper  currency. 

Very  valuable  statistical  and  other  data  relative  to 
exchange,  premium  on  gold,  coins,  etc.,  covering  many 
years,  were  furnished  by  Samuel  Moore,  Director  of  the 

1  Printed  in  full  in  International  Monetary  Conference,  1878,  p.  558. 


36  CONTEST  FOR  SOUND  MONEY 

Mint,  and  by  John  White,  Cashier  of  the  Bank  of  the 
United  States. 

The  views  of  Alexander  Baring,  the  famous  banker 
of  London,  upon  the  single  gold  standard  system  of 
England,  in  which  he  expressed  decided  preference  for 
the  double  standard  at  I5|  to  I  and  voiced  existing  dis- 
satisfaction with  the  new  British  system,  were  also  re- 
printed in  the  report. 

Ingham's  report  unquestionably  influenced  many  of 
the  leading  men  in  Congress.  To  counteract  the  ten- 
dency toward  the  single  standard  Senator  Sanford  of 
New  York,  in  December,  1830,  reported  a  bill  for  the 
continuation  of  the  double  standard  at  the  ratio  of  15.9 
to  1,  altering  the  weight  of  the  gold  coins  only.  The 
The  Sanford  bill  was  ably  supported  in  the  committee's  report1  which 
reports  formed  the  basis  of  two  reports  to  the  House  of  Repre- 

sentatives in  1 83 1,2  one  on  silver  and  the  other  on  gold, 
by  Representative  C.  P.  White,  also  of  New  York. 
The  latter  made  two  further  reports  in  March  and  June, 
1832.3  Together,  these  five  reports  constitute  an  en- 
cyclopedia of  the  then  existing  information  on  the 
subject.  The  House  Committee  opposed  the  double 
standard  because  of  "the  impossibility  of  maintaining 
both  metals  in  concurrent,  simultaneous,  or  promiscuous 
circulation,"  urged  that  the  single  standard  is  the  near- 
est approach  to  stability  precluding  the  need  of  further 
legislation  with  each  change  in  relative  commercial 
value,  and  asserted  that  if  a  metallic  circulation  was 
desired,  notes  of  ten  dollars  and  under  must  be  pro- 
hibited. 

White  would  not  admit,  as  Sanford  claimed,  that  in- 
jurious consequences  would  ensue  if  one  of  the  metals 

1  Senate  Reports,  21st  Congress,  2d  Sess.,  No.  3. 

2  House  Reports,  21st  Congress,  2d  Sess. 

3  House  Reports,  22d  Congress,  1st  Sess.,  Nos.  278,  496. 


THE   COINAGE  SYSTEM  37 


were  rejected.     He  recommended  the  adoption  of  the  white  for 

silver 
standard. 


ratio  of  15.625  to  1  and  .900  as  the  standard  of  fineness.  s 


As  to  this  ratio,  he  regarded  it  the  utmost  limit  to  which 
the  value  of  gold  could  be  raised  if  silver  was  to  be  re- 
tained, and  finally  he  stated  that  "  the  standard  ought  to 
be  legally  and  exclusively,  as  it  is  practically,  regulated 
by  silver." 

The  influence  which  the  large  volume  of  small  notes 
exercised  in  driving  out  coins  was  fully  appreciated  in 
the  House  Committee  reports. 

The  discussion  proceeded  without  action  for  two  years 
longer.  In  February,  1 834,  White  again  reported  upon  the 
subject,  repeating  his  former  bill  and  recommendations.1 

In  May  the  banks  of  New  York,  under  the  lead  of 
Gallatin,  then  president  of  one  of  them,  sent  a  memorial 
to  Congress  asking  for  the  enactment  of  a  law  to  coin 
gold  at  the  rate  of  23.76  grains  of  pure  and  25.92  grains 
standard  metal  to  the  dollar.2  This  would  have  con- 
tinued the  fineness  of  the  coin  at  -9i6|  (or  eleven- 
twelfths)  and,  since  the  silver  dollar  remained  unchanged,  _ 
would  have  resulted  in  a  ratio  of  15.625  to  I.  They 
also  asked  that  the  silver  dollars  of  the  Latin-American 
states  and  the  five-franc  pieces  of  France  be  made  legal 
tender  as  well  as  the  Spanish  dollars,  at  their  proper 
mint  values.  These  coins  had  in  fact  become  the  chief 
elements  in  the  country's  specie  circulation,  and  some 
action  was  necessary  to  provide  a  sufficient  volume  of 
legal  tender  money. 

Later  in  the  session,  when  the  desire  for  action  be-  white  for 
came  pressing  (and   only  one  week  before  the  act  of  gold 
1834  actually  passed),  White  completely  changed   his 
position  and  reported  a  bill  which   practically  favored 
the  gold  instead  of  the  silver  standard,  fixing  a  ratio  of 

1  House  Reports,  23d  Congress. 

2  International  Monetary  Conference,  1878,  p.  679. 


38 


CONTEST  FOR  SOUND  MONEY 


Benton's 
views. 


Gold  mines 
in  Southern 
states. 


about  1 6  to  i.  What  the  influences  were  which  caused 
such  a  radical  change  does  not  clearly  appear.  Many 
of  his  followers,  for  he  had  become  the  recognized 
leader  on  the  subject  in  the  House,  severely  criticised 
his  course. 

From  the  speeches  of  Benton,  the  champion  of  gold 
in  the  Senate,  it  would  appear  that  the  policy  of  adopt- 
ing a  ratio  that  undervalued  silver,  according  to  the 
judgment  of  all  expert  economists,  and  thus  cutting 
loose  practically  from  both  Great  Britain  and  France, 
was  influenced  by  the  desire  to  place  the  country  in 
position  to  draw,  in  competition  with  Spain,  the  precious 
metal  product  of  Mexico,  Central  and  South  America. 
The  Spanish  ratio  had  for  years  been  16  to  I,  and  it 
was  presumed  that  this  caused  the  flow  of  gold  from  the 
Spanish-American  countries  to  the  former  mother  coun- 
try, even  after  the  separation  of  those  colonies  between 
1820  and  1830.1 

There  is  evidence  that  the  action  was  in  part  influenced 
by  the  fact  that  gold  had  been  found  in  North  Carolina 
and  Georgia.  The  production  there  had  been  increasing 
until  the  annual  output  was  nearly  one  million  dollars, 
and  indeed  the  people  of  that  section  of  the  country 
believed  that  the  new  Eldorado  had  been  discovered. 
(In  1835  mints  were  established  at  Dahlonega,  Ga.,  and 
at  Charlotte,  N.C.)  The  argument  that  prosperity, 
so  long  absent  from  the  states,  would  be  restored  if  this 
gold  product  could  be  kept  at  home,  proved  very  capti- 
vating, and  in  order  to  make  assurance  doubly  sure  the 
ratio  was  made  sufficiently  advantageous  to  retain  that 
gold  beyond  peradventure. 

Benton  said :  — 

"  Gold  goes  where  it  finds  its  value,  and  that  value  is  what 
the  laws  of  great  nations  give  it.     In  Mexico  and  South  Amer- 

1  Benton,  Thirty  Years'  View,  p.  436. 


THE   COINAGE  SYSTEM  39 

ica,  the  countries  which  produce  gold,  and  from  which  the 
United  States  must  derive  their  chief  supply,  the  value  of  gold 
is  16  to  1  over  silver;  in  the  Island  of  Cuba  it  is  17  to  1 ;  in 
Spain  and  Portugal  it  is  16  to  1 ;  in  the  West  Indies,  generally, 
it  is  the  same.  It  is  not  to  be  supposed  that  gold  will  come 
from  these  countries  to  the  United  States,  if  the  importer  is  to  Benton  for 
lose  one  dollar  in  every  sixteen  that  he  brings  ;  or  that  our  gold  £old- 
will  remain  with  us,  when  an  exporter  can  gain  a  dollar  upon 
every  fifteen  that  he  carries  out.  Such  results  would  be  con- 
trary to  the  laws  of  trade,  and  therefore  we  must  place  the 
same  value  upon  gold  that  other  nations  do,  if  we  wish  to  gain 
any  part  of  theirs,  or  to  regain  any  part  of  our  own." 

He  made  his  acknowledgments  "to  the  great  apostle 
of  American  liberty  "  (Jefferson)  for  the  wise,  practical 
idea  that  the  value  of  gold  was  a  commercial  question, 
to  be  settled  by  its  value  in  other  countries.  He  had 
seen  that  remark  in  the  works  of  that  great  man,  and 
treasured  it  up  as  teaching  the  plain  and  ready  way  to 
accomplish  an  apparently  difficult  object;  and  he  fully 
concurred  with  the  Senator  from  South  Carolina  (Mr. 
Calhoun)  that  gold  in  the  United  States  ought  to  be  the 
preferred  metal ;  not  that  silver  should  be  expelled,  but 
both  retained ;  the  mistake,  if  any,  to  be  in  favor  of  gold, 
instead  of  being  against  it.1  Looking  to  the  actual  and 
equal  circulation  of  the  two  metals  in  different  coun- 
tries, he  noted  that  this  equality  and  actuality  of  circu- 
lation had  existed  for  above  three  hundred  years  in  the 
Spanish  dominions  of  Mexico  and  South  America,  where 
the  proportion  was  16  to  1.  White  gave  up  the  bill  which 
he  had  first  introduced  and  adopted  the  "  Spanish  ratio." 
John  Q.  Adams  would  vote  for  it,  though  he  thought 
gold  was  overvalued,  but  if  found  to  be  so,  the  difference 
could  be  corrected  thereafter.2 

Speaking  of  the  domestic  supply  of  native  gold,  Benton 

1  Benton,  Thirty  Years'  View,  p.  443. 

2  Ibid.,  p.  469. 


40  CONTEST  FOR  SOUND  MONEY 

Benton's         sajd  that  no  mines  had  ever  developed  more  rapidly  or 
hopes.  promised  more  abundantly  than  those  in  the  Southern 

states  In  the  year  1824  they  were  a  spot  in  the  state 
of  North  Carolina,  they  are  now  a  region  spreading  into 
six  states.  In  the  year  1824  the  product  was  $5000,  in 
1832  he  claimed  the  product  in  coined  gold  was  $868,000, 
in  uncoined  as  much  more,  and  the  product  of  1834 
was  computed  at  $2,000,000,  with  every  prospect  of  con- 
tinued and  permanent  increase.  The  probability  was 
that  these  mines  alone,  in  the  lapse  of  a  few  years, 
would  furnish  an  abundant  supply  of  gold  to  establish 
a  plentiful  circulation  of  that  metal  if  not  expelled  from 
the  country  by  unwise  laws. 

It  was  on  June  21,  1834,  that  the  White  substitute 
bill  was  introduced.  In  one  week  it  became  law,  only 
thirty-six  representatives  and  seven  senators  voting 
against  it  upon  final  passage.  It  is  apparent  that  the 
action  was  taken  from  a  desire  to  accomplish  something 
quickly.  Political  exigency  rather  than  careful  delibera- 
tion caused  the  House  to  ignore  the  ratio  of  1 5.625,  which 
was  held  by  White  two  years  before  to  be  the  "  utmost 
limit  to  which  the  value  [of  gold]  could  be  raised,'-  and 
favor  16  to  1,  without  regard  to  the  commercial  ratio. 
The  act  of  xhe  only  change  made  by  the  act  of  June  28,  1834,1 

respecting  the  coinage,  was  to  alter  the  weight  of  the 
gold  coins,  giving  them  23.2  grains  of  pure  gold  and 
25.8  standard  to  the  dollar.  This  changed  the  fineness 
to  nearly  .900,  instead  of  .9i6|.  The  resulting  ratio 
was  16.002  to  1.  Another  act,  passed  the  same  day, 
provided  that  foreign  gold  coins  were  to  be  received  and 
pass  current  at  the  new  ratings  which  the  preceding  law 
established. 

As  the  Spanish- American  colonies  were  now  separate 
states,  their  silver  coinage  was,  by  the  act  of  June  25, 

1  See  Appendix. 


THE   COINAGE  SYSTEM  4 1 

1834,  made  receivable  the  same  as  the  "  Spanish  dollars" 
if  of  full  weight.  In  fact,  they  superseded  the  Spanish 
coins  which  had  been  issued  from  the  same  mints.  Few, 
if  any,  of  the  "  Spanish  milled  dollars"  that  came  to  the 
United  States  were  coined  in  Spain. 

The  legislation  of  1834  left  the  silver  dollar  exactly  The  act  of 
as  the  act  of  1792  had  fixed  it.  When  in  1836  it  was 
found  desirable  to  revise  the  laws  regulating  the  mint, 
a  bill  containing  thirty-eight  sections  was  introduced,  and 
several  important  changes  in  coins  were  included.  This 
bill  passed  January  18,  1837.1  Section  8  prescribes  that 
the  standard  of  fineness  for  both  gold  and  silver  coins 
shall  be  .900,  thus  avoiding  the  awkward  fraction  fixed 
by  the  law  of  1792.  The  weight  of  pure  silver  in  the 
dollar  remained  the  same,  371.25  grains;  the  gross 
weight  was  altered  from  416  to  412.5  grains,  and  frac- 
tional pieces  were  changed  in  proportion.  The  legal 
tender  power  of  all  silver  pieces  remained  unchanged. 
The  fineness  of  the  gold  coins  was  slightly  increased 
to  make  it  exactly  .900.  The  eagle  thus  weighed  258 
grains,  of  which  232.2  grains  were  pure  gold.  The 
ratio  became  15.988  to  1,  the  same  as  it  is  to-day.  The  Ratio  16  to  1. 
difference  is  so  slight  that  the  custom  has  become  uni-  standard. 
versal  to  characterize  the  present  coinage  ratio  as  "16 
to  1,"  thereby  ignoring  the  fractional  difference  of  .012. 
The  coinage  of  both  metals  was  made  free  and  unlimited, 
and  in  fact  the  coinage  of  silver  dollars  was  resumed. 

The  above-mentioned  ratio  placed  a  valuation  upon  Silver 
gold  of  52  cents  per  ounce  higher  than  that  generally 
prevailing  in  Europe.  It  made  the  silver  dollar  worth 
51.03  measured  by  the  gold  dollar.  Ere  long  silver 
began  to  depart  for  Europe,  where  the  ratio  of  1 5|-  to 
1  prevailed,  and  also  to  India,  which  had  adopted  the 
single  silver  standard  in   1835  at  the  ratio  of  1.5  to  I. 

1  See  Appendix. 


exported. 


42 


CONTEST  FOR  SOUND  MONEY 


The  rate  for 

sterling 

exchange. 


Increase  in 

gold 

product. 


The  commercial  ratio  of  gold  to  silver  did  not  equal 
our  coinage  ratio  until  1874,  silver  all  this  time  com- 
manding a  small  premium.  Although  trade  balances 
were  for  a  number  of  years  adverse,  the  placing  of 
investments  abroad  proved  more  than  an  offset  and  the 
stock  of  gold  in  the  country  increased.  Notwithstanding 
the  continual  export  of  United  States  silver  coin,  the 
influx  of  silver  coins  from  Central  and  South  America, 
which  had  been  made  legal  tender,  prevented  any  seri- 
ous shortage  of  small  coins  for  some  time. 

The  legal  rate  of  the  pound  sterling  was  $4.44^  as 
fixed  by  the  revenue  act  of  July  31,  1789  (prior  to  the 
first  coinage  law),  under  which  imported  wares  from 
British  sources  were  appraised.  Adams  tells  us  that 
this  rating  was  in  accord  with  the  valuation  of  the 
silver  dollar  that  had  been  adopted  by  the  Continental 
Congress  by  the  ordinance  of  1786. 

The  customs  rating  was  $4.44^,  the  actual  rating 
$4,566,  and  thus  the  quotations  of  exchange  at  par 
prior  to  1834  were  in  figures  102.7.  No  legal  change 
was  made  after  the  alteration  of  the  weight  of  the  gold 
coin  in  1834-1837,  yet  by  that  alteration  the  1 13.001 
grains  of  pure  gold  in  the  pound  sterling,  estimated  in 
dollars  of  23.22  grains  pure  gold,  gave  $4.86§.  The 
difference  between  this  last-mentioned  equivalent  and 
the  one  of  1789  amounts  to  o,\  per  cent,1  and  hence 
from  1837  onward  the  par  of  exchange  was  expressed 
with  a  nominal  premium  figure,  thus  109^-,  notwith- 
standing an  act  of  1842  which  rated  sterling  at  $4.84 
in  payments  by  and  to  the  Treasury.  This  anomaly 
continued  until  1873.2 

The  gold  fields  of  the  South  proved  disappointing, 
but  California,  recently  acquired  from  Mexico,  proved 

1  Hunt,  Merchant's  Magazine,  Vol.  I.  p.  536. 

2  See  Chapter  XII. 


THE  COINAGE  SYSTEM  43 

an  Eldorado  indeed,  yielding  $10,000,000  in  1848  and 
$40,000,000  in  1849.  In  the  following  decade  the 
annual  output  continued  large,  the  maximum  being 
$65,000,000  in  1853.  This  enormous  production  dazzled 
the  world  at  that  time,  attracted  foreigners  and  foreign 
capital,  and  proved  of  the  greatest  value  to  our  currency 
and  credit.  But  the  country  was  denuded  of  silver, 
only  the  abraded  foreign  coins  remaining  in  circula- 
tion. The  inconvenience  suffered  by  the  public  for  Dearth  of 
want  of  small  change  became  a  crying  evil,  and  Congress 
was  impressed  with  the  necessity  for  action. 

Thomas  Corwin,  Secretary  of  the  Treasury,  in  an 
elaborate  report  early  in  1852,1  recommended  the  re- 
duction of  the  amount  of  silver  in  coins  as  the  only 
remedy,  and  suggested  that  the  weight  of  all  silver 
pieces,  including  the  dollar,  be  reduced  so  as  to  give 
the  ratio  of  14.88  to  1. 

Senator  Hunter,  in  the  same  year,  made  a  compre-  Hunter's 
hensive  report2  in  which  he  referred  to  the  fears  epor* 
existing  that  the  great  gold  production  would  unsettle 
values.  This  he  believed  would  not  result,  in  view  of 
the  great  increase  of  wealth  and  capital,  if  natural  laws 
were  permitted  to  operate.  But  paper  currency  was 
interfering  with  natural  laws.  He  favored  a  system  Remedies 
of  subsidiary  silver  coinage  in  place  of  bank-notes  of 
smaller  denominations  than  one  dollar  which  had  be- 
come prevalent.  He  added,  "  The  great  measure  of 
readjusting  the  legal  ratio  between  gold  and  silver  can- 
not be  safely  attempted  until  some  permanent  relations 
between  the  market  values  of  the  two  metals  shall  be 
established." 

The  act  of  July  3,  1852,  established  the  mint  in  San 


1  Special  Report,  Finance  Report,  1852. 

2  Senate  Reports,  32c!  Congress,  1st  Sess.,  No.  104. 


proposed. 


44  CONTEST  FOR  SOUND  MONEY 

Francisco,  to  provide  for  the  official  handling  of  the 
large  gold  product  of  the  Pacific  slope. 

Corwin,  in  January,  1853,  again  called  attention  to  the 
general  conditions,  saying  that  no  indication  of  relief 
was  near,  rather  a  prospect  of  reduced  supplies  of 
silver.     He  added :  — 

Corwin  on  «  This  state  of  things  has  banished  almost  entirely  from  circu- 

siiver'  ^  °  lation  all  silver  coins  of  full  weight,  and  what  little  remains  in 
the  hands  of  the  community  consists  principally  of  the  worn 
pieces  of  Spanish  coinage  of  the  fractional  parts  of  a  dollar, 
all  of  which  are  of  light  weight,  and  many  of  them  ten  or 
twenty  per  cent  below  their  nominal  value."  ' 

He  discussed  the  objection  which  had  been  seriously 
raised  that  the  proposed  silver  currency  could  not,  with- 
out a  violation  of  contracts,  be  made  a  legal  tender  for 
the  payment  of  debts,  and  that  the  gold  thereafter  would 
be  the  only  legal  tender.     He  said  :  — 

"  It  is  true  that  heretofore  the  laws  of  the  United  States  have 
recognized  the  coin  of  either  metal  as  a  legal  tender,  and  if  it 
was  at  the  option  of  the  creditor  to  select  what  he  would  receive 
there  would  be  a  very  serious  objection  to  changing  either  the 
weight  or  standard  fineness  of  any  portion  of  the  coin.  But 
this  is  not  the  fact,  as  it  rests  with  the  debtor  to  say  with  which 
description  of  coin  he  will  pay  his  debts,  and  the  natural  and 
inevitable  consequences  of  the  premium  which  silver  now  bears 
have  been  to  establish,  practically,  gold  as  the  only  legal 
tender." 

Subsidiary  These  efforts  finally  resulted  in  the  act  of  February 

coinage  act,  o        o       i  •    i  '  i     i      •  <•  -,  ^  , 

l8s3.  21,  1853/  which  provided  that  after  June  1,  1853,  the 

weight  of  the  half  dollar  or  piece  of  fifty  cents  should 
be  192  grains,  the  quarter  dollar,  dime,  and  half  dime 
respectively  one-half,  one-fifth,  and  one-tenth  of  the 
weight  of  the  half  dollar ;  the  fineness  to  continue  at 

1  Finance  Report,  1853. 

2  See  Appendix. 


THE  COINAGE  SYSTEM  45 

.900;  the  silver  coins  thus  ordered  to  be  legal  tender 
in  payment  of  debts  for  all  sums  not  over  five  dollars. 
The  mint  was  authorized  to  purchase  silver  bullion  for 
coinage,  and  further  deposits  for  coinage  into  fractional 
silver  pieces  for  private  account  was  prohibited,  but  the 
deposit  of  gold  and  silver  for  casting  into  bars  or  ingots 
of  either  pure  or  standard  metal  at  a  charge  of  one-half 
of  one  per  cent  was  permitted.  The  law  also  authorized 
the  coinage  of  $3  gold  pieces.  The  coinage  of  $20  gold 
pieces  had  been  previously  authorized  in  1849. 

The  weight  thus  prescribed  for  the  small  silver  coins, 
384  grains  of  standard  silver  or  345.6  grains  fine  to  the 
dollar,  gave,  as  compared  with  gold,  the  ratio  of  14.882 
to  1,  but  as  it  proved,  the  question  of  the  ratio  of  these 
coins  was  of  no  importance  so  long  as  it  reduced  their 
value  below  the  export  point.  In  a  short  time  the  coun- 
try possessed  a  fairly  adequate  supply  of  small  silver. 

The  act  of  1853  did  not  disturb  the  coinage  of  silver 
dollars.  It  related  solely  to  the  establishment  of  a 
subsidiary  currency  of  silver  to  take  the  place  of  frac- 
tional bank-notes  and  to  establish  a  circulation  of  domes- 
tic coin  in  place  of  the  light  weight  foreign  coins.  Yet  Gold  stand- 
speaking  on  the  question  in  the  House,  Chairman  Dun-  piatecj. 
ham  of  the  Ways  and  Means  Committee  said  : 1  — 

"  We  propose,  so  far  as  these  coins  are  concerned,  to  make 
silver  subservient  to  the  gold  coin  of  the  country.  We  intend 
to  do  what  the  best  writers  on  political  economy  have  approved, 
what  experience,  where  the  experiment  has  been  tried,  has 
demonstrated  to  be  the  best,  and  what  the  Committee  believe 
to  be  necessary  and  proper,  to  make  but  one  standard  of  cur- 
rency and  to  make  all  others  subservient  to  it.  We  mean  to  make 
gold  the  standard  coin,  and  to  make  these  new  silver  coins  appli- 
cable and  convenient,  not  for  large  but  for  small  transactions." 

1  Congressional  Globe,  XXVI.,  p.  190. 


46 


CONTEST  FOR  SOUND  MONEY 


Dunham's 
views. 


Andrew 

Johnson's 

view. 


Farther  on  in  his  speech  he  said :  — 

"Another  objection  urged  against  this  proposed  change  is 
that  it  gives  us  a  standard  of  currency  of  gold  only.  .  .  .  The 
constant  though  sometimes  slow  change  in  the  relative  value  of 
the  two  metals  has  always  resulted  in  great  inconvenience  and 
frequently  in  great  loss  to  the  people.  Wherever  the  experi- 
ment of  a  standard  of  a  single  metal  has  been  tried  it  has 
proved  eminently  successful.  Indeed,  it  is  utterly  impossible 
that  you  should  long  at  a  time  maintain  a  double  standard.  The 
one  or  the  other  will  appreciate  in  value  when  compared  to  the 
other.  It  will  then  command  a  premium  when  exchanged  for 
that  other,  when  it  ceases  to  be  a  currency  and  becomes  mer- 
chandise. It  ceases  to  circulate  as  money  at  its  nominal  value, 
but  it  sells  as  a  commodity  at  its  market  price.  This  was  the 
case  with  gold  before  the  act  of  1834,  but  it  is  now  the  case  with 
silver.  Gentlemen  talk  about  a  double  standard  of  gold  and 
silver  as  a  thing  that  exists,  and  that  we  propose  to  change. 
We  have  had  but  a  single  standard  for  the  last  three  or  four 
years.  That  has  been  and  now  is,  gold.  We  propose  to  let 
it  remain  so  and  to  adapt  silver  to  it,  to  regulate  it  by  it." 

Despite  this  manifest  purpose  the  silver  dollar  re- 
mained in  the  law,  with  full  legal  tender  power  equally 
with  gold. 

The  principal  opponent  of  the  bill  was  Andrew  John- 
son of  Tennessee,  later  Vice-President  and  President. 
The  following  extract  from  his  remarks  is  of  interest : 

"  I  look  upon  this  bill  as  the  merest  quackery  —  the  veriest 
charlatanism  —  so  far  as  the  currency  of  the  country  is  con- 
cerned. The  idea  of  Congress  fixing  the  value  of  currency  is 
an  absurdity,  notwithstanding  the  language  of  the  Constitution 
—  not  the  meaning  of  it.  .  .  .  If  we  can,  by  law,  make  $107 
out  of  $100,*  we  can,  by  the  same  process,  make  it  worth  $150. 
Why,  Sir,  of  all  the  problems-  that  have  come  up  for  solution, 
from  the  time  of  the  alchemists  down  to  the  present  time,  none 


1  The  act  of  1853  altered  the  value  of  the  silver  in  the  subsidiary  coin 
about  7  per  cent. 


THE  COINAGE  SYSTEM  47 

can  compare  with  that  solved  by  this  modern  Congress.  They 
alone  have  discovered  that  they  can  make  money  —  that  they 
can  make  $107  out  of  $100.  If  they  can  increase  it  to  that 
extent  they  can  go  on  and  increase  it  to  the  infinity,  and  thus, 
by  the  operation  of  the  mint,  can  the  Government  supply  its 
own  revenues.  The  great  difficulty  of  mankind  is  solved,  the 
idea  that  so  much  money  is  wanted  all  over  the  world  is  at 
length  at  an  end."  x 

By  an  act  of  March  3,  1853,2  the  date  fixed  for  the  otheriegisia- 
beginning  of  the  subsidiary  coinage  was  changed  from  tlono  l  53* 
June  1  to  April  1,  1853,  and  the  weight  of  the  three- 
cent  silver  piece  was  changed  to  correspond  with  the 
new  standard  for  subsidiary  coin.  Over  $1,000,000  in 
these  pieces  had  been  coined  at  the  lower  fineness  under 
the  law  of  March,  185 1,  showing  the  great  need  for 
small  coin,  especially  for  postage,  then  three  cents. 

Another  act  of  the  same  date  3  provided  for  the  estab- 
lishment of  an  assay  office  at  New  York  and  permitted 
the  deposits  therein  of  gold  and  silver  bullion,  dust  or 
foreign  coin,  for  manufacture  into  bars  or  coin  at  the 
will  of  the  depositor  and  the  issue  of  certificates  of 
deposit  for  the  kind  of  metal  deposited,  which  certifi- 
cates were  made  receivable  in  payment  of  customs  dues 
at  the  port  of  New  York,  for  sixty  days  from  date 
thereof. 

The  estimates  of  specie  in  the  country  show  an  Great 
increase  of  $170,000,000  from  1841  to  1861.  Of  this 
increase  $130,000,000  occurred  subsequent  to  the  year 
1849.  The  principal  cause  was,  of  course,  the  domestic 
production  of  gold  which  was  in  large  measure  retained 
despite  the  exports  due  to  adverse  trade  balances  and 
the  inflated  condition  of  the  paper  currency  from  1850 
to  i860.4 

1  Congressional  Globe,  XXVI.,  p.  475. 

2  See  Appendix.  8  Ibid. 
4  Treasury  Circular  of  Information,  No.  113,  1900,  pp.  61  and  62. 


specie. 


48 


CONTEST  FOR  SOUND  MONEY 


Foreign  coin 
no  longer  a 
tender. 


General 
review. 


Australia  as  well  as  California  had  become  a  large 
producer  of  gold,  and  the  commercial  ratio  of  silver  to 
gold  continued  to  rise  under  the  influence  of  this  largely 
increased  production.  In  1853  the  ratio  rose  above  isl- 
and did  not  again  recede  to  that  point  until  1861.  For 
the  year  1859,  15.19  was  recorded.  The  premium  on  the 
silver  dollar  was  four  to  five  per  cent.  No  dollars  could 
have  circulated  under  these  conditions,  and  hence  but 
few  were  coined.  The  government  actually  coined  less 
than  2,800,000  of  these  pieces  from  1834  to  1861. 

The  final  act  in  the  series  to  establish  a  currency  of 
domestic  coin,  in  place  of  the  depreciated  foreign  pieces, 
became  law  February  21,  1857.1  It  repealed  all  statutes 
permitting  the  circulation  of  and  giving  legal  tender 
power  to  foreign  coins,  excepting  only  the  Spanish- 
American  fractional  silver  pieces,  which  were  to  be 
received  only  at  government  offices  at  a  greatly  reduced 
rate  and  at  once  recoined.  Changes  were  made  in  the 
minor  coins,  nickel  being  then  first  used  in  combination 
with  copper.  The  coinage  of  the  half  cent  was  discon- 
tinued and  the  weight  of  the  cent  was  reduced  from  168 
to  72  grains. 

The  act  also  transferred  from  the  Secretary  of  the 
Treasury  to  the  Director  of  the  Mint  the  duty  of  annu- 
ally reporting  the  values  of  foreign  coins,  and  required 
the  latter  officer  to  make  his  reports  to  the  Treasury 
instead  of  to  the  President. 

A  review  of  the  history  of  the  coinage  laws  prior  to 
1 86 1  shows  that  all  the  leaders  in  the  government  of 
the  country  were  convinced  of  the  imperative  necessity 
of  uniformity  in  the  standard  of  value  as  represented  by 
coin.  Hence  there  was  no  contest  over  the  provision  in 
the  Constitution  which  deprived  the  several  states  of  the 
power  to  coin  money  and  fix  the  value  of  coins.  Nor 
1  See  Appendix. 


THE  COINAGE  SYSTEM  49 

was  there  a  difference  of  opinion  between  the  chief  party 
leaders  at  the  outset  (Hamilton  and  Jefferson)  upon 
the  question  of  the  advisability  of  a  concurrent  use  of 
both  gold  and  silver  at  the  ratio  of  15  to  1.  Being 
unable  to  foresee  the  eventual  change  in  the  commercial 
ratio,  no  provision  was  made  for  an  alteration  in  the 
legal  ratio. . 

Hesitating  to  depart  from  the  bimetallic  policy  adopted  ineffective 
under  the  inspiration  of  these  men,  the  followers  of  reme  ies 
both  in  Congress  did  not  venture  upon  a  radical  change 
such  as  Great  Britain  had  made,  but  endeavored  first 
by  the  legislation  of  1834  and  1837  to  adjust  the  legal  to 
the  commercial  ratio,  the  disparity  in  which  had  deprived 
the  country  of  gold  currency;  and  later,  in  1853,  by 
reducing  the  amount  of  silver  in  the  fractional  coins 
they  sought  to  retain  the  same  in  circulation  as  the 
small  change  of  everyday  transactions  by  making  the 
coins  worth  more  as  money  than  they  were  as  bullion 
for  export.  For  nearly  half  a  century  prior  to  1853  the 
people  had  suffered  from  a  dearth  of  coin  and  especially 
fractional  parts  of  a  dollar,  with  all  the  economic  dis- 
turbances resulting  therefrom. 

Notwithstanding  the  declared  purpose  in  1853  to 
establish  the  single  gold  standard,  the  bimetallic  law 
remained,  and  silver  dollars,  equally  with  gold,  possessed 
full  legal  tender  power.  The  failure  of  Congress  to 
provide  a  sound  coinage  system  with  a  single  standard 
of  value  materially  affected  the  paper  currency  system, 
which  is  now  to  be  discussed,  and  left  the  seed  from 
which  was  to  grow  the  greatest  monetary  heresy  of 
modern  times,  destined  to  threaten  the  welfare  of  the 
people  for  a  quarter  of  a  century. 


5o 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 


Commercial  Ratio  of  Silver  to  Gold 


1831  . 

.  15.72 

1838  .  . 

.  15-85 

1845  • 

•  15-92 

1852  .  . 

•  »5-59 

1832 . 

•  15-73 

1839  .  . 

.  15.62 

1846  . 

.  15.90 

1853  .  • 

•  15-33 

1833  • 

.  15-93 

1840  .  . 

.  15.62 

1847 . 

.  15.80 

1854  .  . 

•  15-32 

1834 . 

•  1573 

1841  .  . 

.  15-70 

1848  . 

•  15-85 

1855  .  . 

•  15.38 

1835  • 

.  15.80 

1842  .  . 

•  15-87 

1849  . 

.  15.78 

1856  .  . 

•  I5-38 

1836 . 

•  15-72 

1843  -  . 

•  15-93 

1850 . 

•  15-70 

1857  .  . 

•  15-27 

1837 . 

.  15-83 

1844  .  . 

•  15-85 

1851  . 

.  15.46 

1858  .  . 

-  I5-38 

1859  .  . 

.  15.19 

i860  . 

•  15-29 

World's  Production  of  Gold  and  Silver 
(Amounts  in  millions  of  dollars) 


Annual  Average 

Per  Cent  by  Value 

Gold 

Silver 

Gold 

Silver 

1831-1840  .    .    . 
1841-1850  .    .    . 

1851-1855  .  .  . 
1856-1860  .    .    . 

13-5 

364 

132.5 

1 34- 1 

24.7 

324 
36.8 

37-6 

35-2 
52.9 
78.3 
78.I 

64.8 
47.I 
2I.7 
2I.9 

The  great  increase  in  production  of  gold,  shown  in  the  above  table, 
accounts  for  the  marked  rise  in  the  price  of  silver,  as  indicated  by  the  fall 
in  the  commercial  ratio. 


Coinage,  United  States 


Years 

Total  Gold 

Silver  Dollars 

Fract.  Silver 

1831-1835       .     .     .     . 

$8,631,700 



$15,371,605 

1836-1840       .... 

10,146,100 

$62,305 

11,909,529.60 

1841-1845       .... 

20,214,180 

567,218 

10,841,782 

1846-1850       .... 

69,001,515 

435.45° 

10,518,680 

1851-1855       .... 

214,142,519.50 

107,650 

22,864,243 

1856-1860       .... 

130,264,446 

i.527»93o 

23,132,280 

THE  COINAGE  SYSTEM 
Exports  and  Imports,  United  States 


51 


Exports 

Imports 

Gold 

Silver 

Gold 

Silver 

1831-1835  .  .  . 

1836-1840    .  '.    . 
1841-1845    .   .    . 

1846-1850    .     .     . 

1851-1855  .  .  . 

1856-1860    .   .    . 

$  7,963,900 

13,578,435 

10,724,258 

20,695,177 

184,017,429 

279,790,526 

$17,873,605 

17,423,953 
19,705,113 
13,886,373 
13,145,180 
18,158,678 

£8,351,935 
25,588,296 
21,525,334 
31,739,452 
1 3,960,026 

23,845>I92 

$42,974,961 
30,554,104 
I9,77!,32I 
13,799,885 

",799,057 
28,083,659 

General  Statistics,  Precious  Metals,  United  States 
(Amounts  in  millions  of  dollars) 


Year 

IS 

0  2 

OS  h 

32 

z 

2  a 

SO 

a 

Pi 

1 

U  < 

35 

O  x 

o? 

<"W 

cojs 

0  z 

OS 
O 

0  &> 

K  O 
PL, 

°5 

&Q 

1831      .... 

0.9 

0.9 

6.0 

6.4 

2.1 

O.S 

0.7 

3-2 

1832 

0.6 

0.7 

3-6 

5-2 

1.4 

0-7 

0.8 

2.6 

1833 

0.5 

0.6 

i-7 

6-5 

O.4 

O.9 

1.0 

2.8 

1834 

0.3 

3.8 

1.4 

14. 1 

O.4 

0.9 

4.0 

34 

1835 

0.6 

2-3 

5-i 

10.8 

0.7 

O.7 

2.2 

3-4 

1836 

0.3 

7.2 

3-7 

6.2 

0-3 

O.7 

4.1 

3-6 

1837 

1.9 

2.4 

2.8 

8.1 

i-3 

O.7 

I.I 

2.1 

1838 

0.7 

11.7 

2.3 

6.1 

0.5 

O.6 

1.8 

2-3 

1839 

2.9 

1.2 

4.0 

4-4 

i-9 

O.6 

1.4 

2.2 

1840 

i-5 

3-i 

4-7 

5-8 

2.2 

o-5 

i-7 

i-7 

1 841 

0.8 

i-3 

6.4 

3-7 

2.7 

0.6 

1.1 

1.1 

1842 

1.1 

0.8 

2.5 

3-3 

1.2 

0.7 

1.8 

2.3 

1843 

0.3 

17.1 

1.1 

5-3 

0.1 

0.8 

8.1 

3-8 

1844 

1.2 

1.6 

4.1 

4.2 

0.2 

0.9 

5-4 

2.2 

1845 

2.2 

0.8 

5-6 

3-3 

0.8 

1.0 

3-8 

1.9 

1846 

1.6 

0.9 

i-9 

2.9 

0.4 

1.1 

4.0 

2.6 

1847 

1.0 

21.6 

0.9 

2.5 

O.I 

0.9 

20.2 

2.4 

1848 

8.4 

3-4 

4.8 

3-o 

2.7 

1 0.0 

3.8 

2.0 

1849 

1.0 

4.1 

3-4 

2.6 

1.0 

40.0 

9.0 

2.1 

Production  of  silver  in  the  United  States  for  the  period,  $500,000. 

The  silver  coinage  included  only  1,017,500  silver  dollars. 

Domestic  coin  exports  included  both  gold  and  silver,  but  the  Mint 
reports  include  them  with  the  gold.  The  figures  are  presented  as  the  best 
available,  without  claiming  accuracy. 


52 


CONTEST  FOR  SOUND  MONEY 


General  Statistics,  Precious  Metals,  United  States 


Year 

t/i 

o2 

"  s 

0  2 

(A 

OS  s- 

u  K 
>  0 

eg 

S2 

h 
u  « 

2  0 
0  0 

so 

M 

0  £ 

M 

«  < 

32 

O  X 

w 

°l 

c*£ 

^M 

0  z 

05 

O 

0  „ 
0  <*« 
K  O 

°a 

^cj 

1850     .... 

2.CJ 

1.8 

3-o 

2.9 

2.0 

50.0 

32.0 

1.9 

1851 

4.8 

3-6 

6.6 

i-9 

18.I 

55° 

62.6 

0.8 

1852 

2.6 

3-7 

2.6 

1.8 

374 

60.0 

56.8 

1.0 

i«53 

i-9 

2.4 

2.0 

1.8 

23-5 

65.0 

394 

9-i 

i«S4 

2-5 

3-o 

0.7 

3-7 

38.1 

60.0 

25-9 

8.6 

1855 

1.2 

1.1 

1.1 

2.6 

54.o 

55-o 

29.4 

3-5 

1856 

O.9 

1.0 

0.7 

3-2 

44.1 

55-o 

36.9 

S-1 

1857 

5-2 

6.7 

3-9 

S-« 

60.1 

55-° 

32.2 

5-5 

1858 

7.6 

1 1.6 

2.6 

7-7 

42.4 

50.0 

22.9 

*-5 

i8S9 

3-6 

2.1 

2.8 

5-3 

57-5 

50.0 

14.8 

3-3 

i860 

i-5 

2-5 

8.1 

6.0 

56-9 

46.0 

23-5 

2-3 

The  production  of  silver  in  the  United  States  was  only  $1,150,000. 

The  silver  coinage  included  only  1,682,080  silver  dollars. 

Domestic  coin  exports  included  both  gold  and  silver,  hut  the  Mint 
reports  include  them  with  the  gold.  The  figures  are  presented  as  the  best 
available,  without  claiming  accuracy. 


II.   THE    PAPER   CURRENCY 
CHAPTER  IV 

1775  TO   l8ll 

The  history  of  the  United  States  shows  that  the 
people  have  experimented  with  every  known  description 
of  paper  currency.  The  history  of  the  colonial  paper 
issues  would  form  a  bulky  volume. 

Prior  to  1775  every  one  of  the  colonies  had  at  one  The  colonial 
time  or  another  made  use  of  note  issues,  generally  under 
government  authority,  but  in  some  cases  emanating  from 
private  banking  concerns.  In  most  instances  the  issues 
were  made  to  obviate  raising  revenue  by  taxation,  but 
the  volume  was  doubtless  increased  owing  to  the  scarcity 
of  coin,  since  notes  of  denominations  as  low  as  three- 
pence, issued  during  that  period,  are  still  in  existence. 
Massachusetts  appears  to  have  taken  the  lead  in  this  as 
well  as  in  many  other  matters,  and  as  early  as  1690 
issued  "  bills  of  credit "  to  pay  soldiers.1  No  adequate 
provision  for  the  redemption  of  the  notes  was  made, 
and  depreciation  generally  followed ;  and  this  proved 
equally  true  where  the  currencywas  given  forced  pay- 
ing power.  Some  of  the  earlier  forms  merely  certified 
that  the  bearer  was  entitled  to  receive  so  many  dollars, 
some  promised  interest,  but  later  the  form  "  This  bill  Forced  cur- 
shall  pass  current  for dollars"  was  quite  generally 

adopted. 

When  an  issue  had  depreciated  to  such  an  extent  as 

1  Knox,  United  States  Notes,  I. 
53 


54  CONTEST  FOR  SOUND  MONEY 

to  be  thoroughly  discredited  it  would  be  redeemed  at  a 
percentage,  and  sometimes  a  very  small  percentage,  of 
its  par  value,  in  a  new  issue  put  forth  with  solemn 
pledges  for  its  redemption,  which  new  issue  underwent 
in  turn  a  like  depreciation.  The  losses  suffered  by  New 
England  on  account  of  depreciated  paper  currency  prior 
to  the  Revolution  were  much  greater  proportionately 
than  the  losses  sustained  by  the  other  colonies.  This 
section  was  more  prolific  in  schemes  with  reference  to 
currency. 

Gouge  reports  that  in  1748  the  quotation  for  ^100  in 
coin  ranged  from  £120  in  Virginia  paper  to  ^1100 
in  that  of  New  England.1  No  definite  record  of  the 
amounts  of  such  currency  is  available,  but  that  the 
values  destroyed  by  depreciation  were  very  great,  con- 
sidering the  relative  poverty  of  the  colonies,  is  beyond 
doubt. 

All  the  bitter  experiences  which  must  have  resulted 
were,  however,  apparently  forgotten  during  the  days  of 
the  Revolution.  As  early  as  May,  1775,  the  movement 
Continental  to  emit  bills  of  credit  was  begun.  Both  Massachusetts 
and  New  York  communicated  to  the  Continental  Con- 
gress a  desire  for  the  issue  of  paper,  the  former  colony 
advising  that  body  of  an  authority  given  to  its  receiver- 
general  to  borrow  .£100,000  "to  support  the  forces," 
and  asking  Congress  to  assist  in  giving  the  notes  "a 
currency  through  the  continent."  2  The  communication 
from  New  York  urged  Congress  to  issue  notes,  rather 
than  have  separate  issues  by  the  colonies,  but  events 
moved  too  rapidly,  for  we  find  that  New  York  itself 
issued  $112,500  in  that  year.3 

1  Gouge,  Short  History  of  Paper  Money  and  Banking  in  the  United 
States. 

2  Journal,  Continental  Congress. 

8  Schuckers,  Finances  of  the  Revolutionary  War. 


THE  PAPER   CURRENCY  55 

The  Continental  Congress  was  powerless  to  impose 
taxes,  and  hence  unable  to  make  loans ;  consequently, 
burdened  with  the  duty  of  prosecuting  a  war,  no  other 
recourse  than  note-issuing  seemed  possible.  Accord- 
ingly, on  June  22,  1775,  but  not  without  considerable 
opposition,  a  first  issue  of  what  was  afterwards  known 
as  Continental  Currency  was  authorized,  in  denomina- 
tions from  $1  to  $8  and  of  $20,  to  the  amount  of 
$2,ooo,ooo.1 

The  form  adopted  was  simple.     It  read:  "This  bill  Form  of  the 

entitles  the  bearer  to  receive Spanish  milled  dollars,  no  es' 

or  the  value  thereof  in  Gold  or  Silver,  according  to 
the  resolution  of  the  Congress,  held  at  Philadelphia  on 
the  10th  day  of  May,  a.d.  1775."  The  notes  were  num- 
bered in  ink  and  signed  by  two  persons  duly  designated 
by  Congress.  While  no  terms  of  redemption  were  fixed, 
Congress  pledged  the  faith  of  the  colonies  to  such 
redemption. 

A  second  issue  of  $  1 ,000,000  was  authorized  in  July,  Further 
and  at  this  time  Congress  apportioned  the  liability  for  lssues* 
the  total  issue  to  the  several  colonies  in  proportion  to 
the  estimated  population.2  Under  this  act  the  redemp- 
tion of  the  currency  was  to  be  provided  for  in  four 
instalments,  beginning  in  1779.  In  November  a  further 
issue  of  $3,000,000  was  voted. 

It  will  be  observed  that  the  currency  bore  no  legal 
tender  provision.  The  notes  were  generally  received 
without  objection  for  a  time,  but  early  in  1776  difficulties 
were  encountered  and  a  question  arose  as  to  the  value 
of  the  coins  in  which  the  notes  were  payable.  Congress 
thereupon  adopted  resolutions  fixing  the  value  of  these 
coins.  The  following  portions  of  the  resolution  show 
the  status  of  the  paper  issues :  — 

1  Journal,  Continental  Congress.  2  Ibid. 


56 


CONTEST  FOR  SOUND  MONEY 


Redemption 
of  currency 
discussed. 


Drastic 
force  laws 
contem- 
plated. 


"  Whereas  the  holders  of  bills  of  credit  emitted  by  authority 
of  Congress  will  be  entitled,  at  certain  periods  appointed  for 
redemption  thereof,  to  receive  out  of  the  treasury  of  the 
United  Colonies  the  amount  of  the  said  bills  in  Spanish  milled 
dollars,  or  the  value  thereof  in  gold  or  silver,  and  the  value  of 
such  dollars,  compared  with  other  silver  and  gold  coins,  is 
estimated  by  different  standards  in  different  Colonies,  whereby 
injustice  may  happen  in  some  instances  to  the  public,  as  well 
as  to  individuals,  which  ought  to  be  remedied. 

"  And  whereas  the  credit  of  the  said  bills  as  current  money 
ought  to  be  supported  by  the  inhabitants  of  these  Colonies,  for 
whose  benefit  they  were  issued  at  the  full  value  therein  ex- 
pressed, and  who  stand  bound  to  redeem  the  same,  according 
to  the  like  value,  and  the  pernicious  artifices  of  the  enemies 
of  American  liberty  to  impair  the  credit  of  the  said  bills  by 
raising  the  nominal  value  of  gold  and  silver  ought  to  be  guarded 
against  and  prevented,  therefore  .   .  . 

"  Resolved,  That  all  bills  of  credit  emitted  by  authority  of 
Congress  ought  to  pass  current  in  all  payments,  trade  and  deal- 
ings in  these  Colonies,  and  be  deemed  equal  in  value  to  gold 
and  silver,  .  .  .  and  that  whosoever  shall  offer,  demand,  or 
receive  more  in  the  said  bills  for  any  gold  or  silver  coins,  or 
bullion,  than  at  the  rates  aforesaid,  or  more  of  the  said  bills  for 
any  lands,  houses,  goods,  wares  or  merchandise  than  the  nomi- 
nal sums  at  which  the  same  might  be  purchased  of  the  same 
person  with  gold  or  silver,  every  such  person  ought  to  be 
deemed  an  enemy  to  the  liberties  of  these  Colonies,  and  treated 
accordingly,  being  duly  convicted  thereof  before  the  committee 
of  inspection  of  the  city,  county  or  district,  or  in  case  of  an 
appeal  from  their  decision,  before  the  assembly  convention 
council  or  committee  of  safety  or  before  such  other  persons  or 
courts  as  have  or  shall  be  authorized  by  the  general  assemblies 
or  conventions  of  the  Colonies  respectively  to  hear  and  de- 
termine such  offences." 1 


An  earlier  pronouncement  contained  this  language  :  — 

"...  that  any  person  who  shall  hereafter  be  so  lost  to  all 
virtue  and  regard  for  his  country  as  to  refuse  to  receive  said  bills 

1  Journal,  Continental  Congress. 


THE  PAPER    CURRENCY  57 

in  payment,  or  obstruct  and  discourage  the  currency  or  circula- 
tion thereof,  and  shall  be  duly  convicted  .  .  .  shall  be  deemed, 
published  and  treated  as  an  enemy  of  his  country,  and  pre- 
cluded from  all  trade  or  intercourse  with  the  inhabitants  of 
those  colonies." 1 

In  1776  Congress  authorized  the  issue  of  $19,000,000,  Further 
in  1777,  $13,000,000  more,  making  the  total  so  far  expansion- 
$38,000,000.  The  states  had  issued  in  the  same  period 
about  $10,000,000,  so  that  the  total  volume  was  about 
$16  per  capita.2  Accordingly,  in  the  latter  year  depre- 
ciation began,  and  stringent  legal  tender  laws  were 
passed  by  all  the  states,  in  the  vain  hope  of  forcing  the 
people  to  take  these  notes  as  the  equivalent  of  coin. 
Congress  recommended  taxation  by  the  states  and  at- 
tempted also  to  borrow  money,  but  these  efforts  were 
fruitless.  In  1778  further  issues  of  $63,500,000  were 
made,  and  naturally  further  depreciation  ensued.  At 
the  end  of  the  year  the  ratio  to  coin  was,  as  officially 
fixed  by  Congress,  100  to  I3^.3  Actually  the  deprecia- 
tion was  greater,  the  rating  by  Congress  having  been 
too  favorable  to  the  paper  currency.  In  1779  the  issue  Rapid  depre- 
exceeded  $140,000,000,  thus  making  a  total  of  over 
$241,500,000  (although  a  limit  of  $200,000,000  had  been 
resolved  upon),4  to  which  must  be  added  about  $20,000,- 
000  of  local  issues.  Counterfeiting  had  become  quite 
prevalent  and  accelerated  depreciation  so  that  at  the 
end  of  1779  the  official  rating  to  coin  was  about  as  100 
to  3|.5  Congress  stopped  further  emission,  but  some  of 
the  states  (notably  Virginia  and  North  Carolina)  in- 
creased their  issues,  redeeming  some  of  the  old  issues 

1  Journal,  Continental  Congress. 

2  Schuckcrs,  Finances  of  the  Revolutionary  War. 
8  Phillips,  Continental  Paper  Money. 

4  Journal,  Continental  Congress. 

6  Phillips,  Continental  Paper  Money. 


58 


CONTEST  FOR  SOUND  MONEY 


Great 
distress. 


Legal  tender 

again 

discussed. 


at  the  depreciated  value  with  the  new  ones.  Some  of 
these  new  issues  were  six-year  interest-bearing  notes  in- 
dorsed by  the  United  States.  Such  redemption  practi- 
cally repudiated  thirty-nine  fortieths  of  the  notes,  yet 
creditors  were  compelled  to  accept  the  old  notes  at  face 
value  under  the  legal  tender  laws.1 

In  1780  the  state  issues  amounted  to  over  $37,000,000, 
of  which  Virginia  had  emitted  over  $30,000,000;  in  1781 
to  upward  of  $116,000,000,  of  which  Virginia  had 
emitted  $87,500,000  and  North  Carolina  $26,25o,ooo.2 

The  distress  resulting  was  manifestly  extreme.  The 
paper  currency  had  reached  a  volume  averaging  about 
$150  per  capita.  The  continental  notes  in  1871  were 
quoted  at  the  ratio  of  225  to  1  of  coin,  later  500  to  1  is 
mentioned,  and  Pelatiah  Webster  states  that  its  circu- 
lation "  was  never  more  brisk  "  than  at  that  time.3 

It  should  be  noted  that  the  Articles  of  Confederation 
adopted  in  1781  gave  Congress  the  power,  coordinately 
with  the  states,  "to  borrow  money,  or  emit  bills  on  the 
credit  of  the  United  States,"  but  accorded  to  it  no  power 
to  levy  taxes.  A  large  loan  from  France  at  this  time 
no  doubt  saved  the  embryo  government  from  impending 
dissolution. 

At  the  behest  of  Congress  the  states  revised  and 
relaxed  their  legal  tender  laws  so  far  as  continental  cur- 
rency was  concerned.  Some  of  them  continued  extreme 
penalties  for  refusal  to  accept  the  local  issues,  although 
not  without  strenuous  protests.  In  one  of  these  protests 
appears  the  following :  "  That  if  public  confidence 
was  wanting  tender  laws  could  not  replace  it.  .  .  .  If 
the  paper  were  of  full  value  it  would  pass  current  with- 
out such  aid ;  if  it  were  not,  then  to  compel  persons  to 
receive  it  at  the  nominal  value  would  be  an  act  of  dis- 

1  Phillips,  Continental  Paper  Money. 
2  Ibid.  3  Political  Essays. 


THE  PAPER   CURRENCY  59 

honesty.  That  it  was  inconsistent  with  true  principles 
to  interfere  in  any  manner  with  the  free  disposal  of 
property."  1 

The  craze  practically  passed  with  1781.  It  is  not  very 
clear  how  much  continental  currency  was  actually  issued 
during  the  period,  but  it  was  unquestionably  in  excess 
of  $200,000,000.  One  account  places  the  sum  at 
$357,000,000,  but  this  no  doubt  includes  "re-issues," 
new  notes  substituted  for  old.  That  the  limit  attempted 
to  be  fixed  by  Congress  was  exceeded  appears  beyond 
question.2 

In  1 783  Congress  considered  the  question  of  redeem-  Redemption 
ing  the  notes,  but  no  action  was  taken  until  after  the  tai  currency, 
adoption  of  the  Constitution,  when,  in  1790,  redemption 
at  100  to  1  was  provided  for,  if  notes  were  presented 
prior  to  September  30,  1791.3  This  time  limit  was  ex- 
tended by  subsequent  acts  of  Congress,  finally  until 
December  31,  1797.4  Since  continental  notes  were  so  de- 
preciated in  value  as  to  be  quoted,  in  1781,  at  a  ratio  of 
225  to  1  in  coin  (in  other  words,  continental  notes  were 
worth  in  coin  .0044  +  ),  it  is  probable  that  those  who 
received  the  notes  in  the  later  years  of  the  Revolution 
suffered  no  loss  in  having  them  redeemed  in  coin  at  the 
ratio  of  100  to  1  or  .01  of  their  face  value.  Nevertheless, 
it  is  a  rather  humiliating  fact  that  the  United  States 
scaled  down  the  obligations  issued  in  prosecuting  the  war 
which  achieved  its  independence  as  a  nation,  99  per  cent. 

Beside  the  French  loan  another  important  event  in 
1 78 1  materially  assisted  in  maintaining  the  credit  of  the 
country.  Robert  Morris  persuaded  Congress  to  authorize 
the  establishment  of  the  Bank  of  North  America,6  the 

1  Phillips,  Continental  Paper  Money. 

2  Nourse,  Register  United  States  Treasury,  in  American  Almanac,  1830. 
8  United  States  Statutes,  Vol.  I.  *  Ibid. 

6  Clarke  and  Hall,  Documentary  History  of  Bank  of  United  States,  p.  9. 


6o 


CONTEST  FOR  SOUND  MONEY 


The  first 
corporate 
bank 
founded. 


Other  banks 
established. 


The  Consti- 
tution and 
paper 
money. 


first  incorporated  bank  in  the  country,  still  in  existence 
in  Philadelphia  as  a  national  bank.1  The  capital  was 
$400,000,  of  which  the  government  took  $250,000,  but 
sold  its  holdings  in  1783,  being  induced  to  do  so  by 
extreme  financial  needs.  The  bank's  charter  was  per- 
petual, and  a  number  of  the  states  granted  it  local  char- 
ters. It  rendered  the  government  valuable  assistance 
and  commanded  general  confidence.  Its  note  issues  soon 
found  their  way  into  general  use,  circulating  at  par. 

In  1784  the  Bank  of  New  York,  in  New  York  City, 
and  the  Massachusetts  Bank,  in  Boston,  were  organized 
and  are  still  doing  a  successful  business.  Alexander 
Hamilton  was  a  controlling  influence  in  the  organization 
of  the  Bank  of  New  York,  and  drew  its  charter,  which, 
however,  was  not  granted  by  the  Legislature  until  1791. 
These  three  institutions  were  the  only  ones  which  pre- 
ceded the  establishment  of  the  Bank  of  the  United  States. 
Their  notes  gave  the  people  an  excellent  paper  currency 
which  served  as  -an  educating  influence  against  "fiat 
money  "  schemes,  the  disastrous  effects  of  which  led  to 
the  adoption  of  sounder  principles  in  framing  the  Con- 
stitution in  1787.  That  instrument,  which  went  into 
effect  in  1 789,  provided  as  follows  :  — 

Art.  I.  Sec.  8.  "The  Congress  shall  have  power  ...  to 
borrow  money  on  the  credit  of  the  United  States,  ...  to  coin 
money,  regulate  the  value  thereof,  and  of  foreign  coin." 

Art.  I.  Sec.  10.  "No  state  shall  .  .  .  coin  money,  emit 
bills  of  credit,  make  anything  but  gold  and  silver  coin  a  tender 
in  payment  of  debts,  pass  any  .  .  .  law  impairing  the  obliga- 
tion of  contracts." 

Fresh  from  their  experiences  with  continental  paper 
currency,  so  disastrous  to  all,  it  would  appear  reasonable 

1  It  was  in  a  sense  the  successor  of  an  informal  banking  association 
organized  in  Pennsylvania  a  few  years  earlier,  to  assist  the  Continental 
Congress. 


convention. 


THE  PAPER    CURRENCY  6 1 

to  assume  that  the  intention  of  the  framers  of  the  Con- 
stitution was  to  prohibit  all  issues  of  legal  tender  paper 
by  Congress.  George  Bancroft  contends,  in  antagonism 
to  the  Supreme  Court,  that  the  record  of  the  proceedings 
of  the  convention  leaves  no  doubt  of  such  intention. 

Upon  the  question  whether  the  power  to  "  emit  bills  Debate  jn 
of  credit,"  as  stated  in  the  draft  of  the  Constitution  then 
under  consideration,  should  be  given  the  United  States, 
Gouverneur  Morris,  in  opposition,  remarked  that  "if 
the  United  States  have  credit,  such  bills  will  be  un- 
necessary ;  if  they  have  not,  will  be  unjust  and  useless." 
He  was  vigorously  supported  by  other  delegates.  Ells- 
worth said  it  was  a  favorable  moment  to  "  shut  and  bar 
the  door  against  paper  money."  Wilson  said  that  the 
striking  out  of  the  provision  would  "  remove  the  possi- 
bility of  paper  money."  Langdon  preferred  rejecting  the 
whole  plan  rather  than  retain  the  three  words  "  and  emit 
bills."  Madison,  who  hesitated  to  strike  out  the  words, 
finally  assented  after  having,  as  he  said,  satisfied  himself 
that  it  would  not  disable  the  government  from  using  its 
credit,  but  would  cut  off  the  pretext  for  a  paper  currency 
and  particularly  for  making  bills  a  tender  either  for 
public  or  private  debts.1 

The  words  were  stricken  out  by  a  vote  of  four  to  one, 
and  unquestionably  the  convention  intended  to  withhold 
from  the  federal  government  the  power  to  create  paper 
money  with  legal  tender  attributes. 

The  foregoing  comments  are  here  briefly  introduced 
in  chronological  order,  but  will  again  be  referred  to  in  dis- 
cussing government  paper  currency  issues  in  later  years. 

The  course  pursued  by  the  "fathers"  respecting  bank 
paper  currency  under  the  Constitution  will  now  be  con- 
sidered. 

1  Bancroft,  A  Plea  for  the  Constitution,  quoting  Elliot's  Debates  of  the 
Constitutional  Convention. 


62 


CONTEST  FOR  SOUND  MONEY 


Hamilton's 
report  on  a 
bank. 


Its  great 
utility. 


Objections 
answered. 


In  reply  to  an  order  from  Congress,  to  inform  that 
body  what  further  provisions  he  deemed  necessary  to 
establish  the  public  credit,  Alexander  Hamilton,  in 
December,  1790,  submitted  his  plan  for  the  establishment 
of  a  Bank  of  the  United  States,  similar  in  its  constitution 
to  the  Bank  of  England.1  He  regarded  it  necessary, 
owing  to  the  lack  of  knowledge  of  the  functions  of 
banks,  to  devote  a  large  portion  of  the  report  to  that 
subject.  He  showed  very  lucidly  how  the  system  of 
discounts  and  credits  and  the  use  of  checks,  operated  to 
supplement  the  stock  of  coin  and  foster  trade  and  com- 
merce. He  demonstrated  that  the  organization  of  such 
a  bank  of  issue  would  enable  the  country  to  obtain  a 
manifold  use  of  the  volume  of  coin  available,  would  aid 
the  government  in  obtaining  loans  in  sudden  emergen- 
cies by  having  the  capital  concentrated,  would  facilitate 
the  payment  of  taxes  by  extending  credit  and  also  fur- 
nish a  convenient  medium  for  remittance  from  place  to 
place,  which  latter  function  would  be  further  facilitated 
by  the  system  of  branches  proposed.  The  bank  would 
serve  as  the  receiver  and  disburser  of  public  funds,  and 
the  money  derived  from  taxes  would  not  be  locked  up 
awaiting  the  government's  expenditures,  but  remain  all 
the  while  in  circulation.  He  thus  anticipated  the  argu- 
ments against  the  present  subtreasury  system. 

He  controverted  the  current  charges  that  banks  "serve 
to  increase  usury,"  that  they  "tend  to  prevent  other 
kinds  of  lending,"  "furnish  temptations  to  overtrading," 
"afford  aid  to  ignorant  adventurers,"  "give  to  bankrupt 
and  fraudulent  creditors  fictitious  credit,"  and  "  have  a 
tendency  to  banish  gold  and  silver  from  the  country." 

Upon  the  last  point  he  remarked  :  — 

"  A  nation  that  has  no  mines  of  its  own  must  derive  the  pre- 
cious metals  from  others;  generally  speaking,  in  exchange  for 

1  Appendix. 


THE  PAPER   CURRENCY  63 

the  products  of  its  labor  and  industry.  The  quantity  it  will 
possess  will,  therefore,  in  the  ordinary  course  of  things,  be  regu- 
lated by  the  favorable  or  unfavorable  balance  of  its  trade  ;  that 
is,  by  the  proportion  between  its  abilities  to  supply  foreigners, 
and  its  wants  of  them,  between  the  amount  of  its  exportations 
and  that  of  its  importations.  Hence,  the  state  of  its  agriculture 
and  manufactures,  the  quantity  and  quality  of  its  labor  and  in- 
dustry, must,  in  the  main,  influence  and  determine  the  increase 
or  decrease  of  its  gold  and  silver.  If  this  be  true,  the  inference 
seems  to  be  that  well  constituted  banks  favor  the  increase  of 
the  precious  metals.  It  has  been  shown  that  they  augment,  in  Currency 
different  ways,  the  active  capital  of  a  country.     This  it  is  which  volum^ ln" 

'     ,  ...         .  .  creased  by  a 

generates  employment,  which  animates  and  expands  labor  and  bank, 
industry.  Every  addition  which  is  made  to  it,  by  contributing 
to  put  in  motion  a  greater  quantity  of  both,  tends  to  create  a 
greater  quantity  of  the  products  of  both,  and,  by  furnishing 
more  materials  for  exportation,  conduces  to  a  favorable  balance 
of  trade,  and  consequently  to  the  introduction  and  increase  of 
gold  and  silver." 

These  statements  of  rudimentary  banking  principles 
and  defence  of  the  character  and  purpose  of  banks  sound 
very  droll,  read  in  the  light  of  the  wonderful  develop- 
ment of  modern  banking,  and  yet  the  primitive  conditions 
demanded  such  an  exposition  and  such  defence. 

Comparing  a  government  with  a  bank  currency,  he 
said :  — 

"  Among  other  material  differences  between  a  paper  currency  Advantage  of 
issued  by  the  mere  authority  of  government  and  one  issued  by  bankover 

J  jo  j     government 

a  bank,  payable  in  coin,  is  this ;  that  in  the  first  case  there  is  currency, 
no  standard  to  which  an  appeal  can  be  made  as  to  the  quantity 
which  will  only  satisfy  or  which  will  surcharge  the  circulation ; 
in  the  last  that  standard  results  from  the  demand.  If  more 
should  be  issued  than  is  necessary  it  will  return  upon  the  bank. 
Its  emissions,  as  elsewhere  intimated,  must  always  be  in  a  com- 
pound ratio  to  the  fund  and  the  demand,  whence  it  is  evident 
that  there  is  a  limitation  in  the  nature  of  the  thing ;  while  the 
discretion  of  the  government  is  the  only  measure  of  the  extent 
of  the  emissions  by  its  own  authority." 


64  CONTEST  FOR  SOUND  MONEY 

State  banks,  he  showed,  could  not  serve  the  govern- 
ment as  well  as  a  federal  corporation,  being  unable  to 
furnish  adequate  security  for  public  moneys,  and  not 
amenable  to  Congress  or  federal  authority.  He  would 
have  favored  the  utilization  of  the  Bank  of  North 
America  under  its  perpetual  charter  from  the  Continen- 
tal Congress  had  the  bank  not  been  handicapped  by  the 
acceptance  of  charters  from  several  states.  Even  its 
original  charter  from  Congress,  in  Hamilton's  opinion, 
required  material  amendment  to  serve  the  purpose  he 
had  in  view. 
The  The  bank  charter  bill  passed  Congress  substantially 

objections.  m  tne  form  presented  by  Hamilton,  despite  the  objec- 
tions of  most  of  the  adherents  of  Jefferson  and  Madison, 
who  opposed  it  upon  constitutional  as  well  as  other 
grounds.1  The  Cabinet  of  Washington  was  evenly 
divided  upon  the  question,  but  the  bill  received  Wash- 
ington's approval  on  February  25,  1791.  Before  it  was 
approved,  Hamilton  prepared  a  masterful  argument 
upon  the  subject  of  its  constitutionality,  in  reply  to  Jef- 
ferson and  Edmund  Randolph,  who  advised  against 
approval  on  the  ground  that  it  was  not  authorized  by 
the  Constitution.2 

This  was  practically  the  first  important  crossing  of 
swords  between  the  strict  constructionists  of  the  organic 
law  and  those  who  believed  in  broader  lines  of  inter- 
pretation. In  the  final  analysis  the  argument  turned 
upon  the  question  of  the  expressed  and  the  implied 
Hamilton's  powers  of  the  federal  government.  While  practically 
broad-gauge  admitting  that  there  was  no  express  grant  of  power  to 
Congress  to  create  corporations,  Hamilton  urged  that 
implied  powers  were  equally  authoritative  —  that  the 
sole  question  was  whether  the  end  to  be  served  came 

1  Qarke  and  Hall,  Documentary  History  of  Bank  of  United  States. 

2  Ibid. 


THE  PAPER    CURRENCY  65 

within  the  scope  of  the  federal  authority  and  needs  — 
"  within  the  sphere  of  the  specified  powers."  If  this 
were  answered  affirmatively,  the  means  necessarily 
employed  to  accomplish  such  end  must  be  constitu- 
tional. For  example,  under  the  expressed  power  of 
regulating  commerce,  lighthouses,  etc.,  were  provided 
for,  and  the  power  thus  implied  to  establish  lighthouse 
service  was  also  a  sovereign  and  unlimited  power. 

He  then  proceeded  to  show  how  the  incorporation  of  a  bank  as  a 
the  bank  was  a  means  to  the  end  of  facilitating  the  fuxiiiary611 
government's  fiscal  operations,  as  well  as  establishing 
a  broader  and  stronger  credit  and  currency  system  for 
the  entire  country,  promoting  uniformity  in  those  impor- 
tant particulars,  and  hence  the  general  welfare,  func- 
tions which  the  state  banks  could  not  possibly  exercise 
to  advantage. 

Replying  to  Jefferson's  contention  that  while  con- 
venient this  was  not  necessary,  and  that  necessity  con- 
stituted the  only  valid  reason  for  exercising  implied 
powers,  he  maintained  that  to  define  that  word  so  nar- 
rowly would  lead  to  a  restriction  of  the  powers  of  the 
federal  government  which  would  largely  defeat  the  pur- 
pose of  the  Constitution.  The  following  quotation  con- 
tains the  gist  of  his  argument :  — 

"  This  general  principle  is  inherent  in  the  very  definition  of    Sovereign 
government,  and  essential  to  every  step  of  the  progress  to  be   j5™6"  of 
made  by  that  of  the  United  States ;  namely,  that  every  power  ernment. 
vested  in  the  government  is,  in  its  nature,  sovereign,  and  in- 
cludes, by  force  of  the  term,  a  right  to  employ  all  the  means 
requisite  and  fairly  applicable  to  the  attainment  of  the  ends  of 
such  power  and  which  are  not  precluded  by  restrictions  and 
exceptions  specified  in  the  Constitution,  or  not  immoral,  or  not 
contrary  to  the  essential  ends  of  political  society." 

The  argument  of   Hamilton  was   adopted   by  Chief 


66 


CONTEST  FOR  SOUND  MONEY 


Marshall 

sustains 

Hamilton. 


Justice  Marshall  in  sustaining  the  United  States  Bank 
charter,  and  later  by  the  Supreme  Court  in  upholding 
the  legal  tender  power  of  United  States  notes.  Hamil- 
ton's position  was  indorsed  by  Washington,  and  in  sev- 
eral instances  when  amendatory  acts  were  passed  by 
Congress,  Jefferson,  when  he  became  President,  inter- 
posed no  objection  nor  did  the  charter  ever  come  for 
review  before  the  Supreme  Court.  The  charter  of  the 
second  bank  did,  and  since  many  of  the  points  at  issue 
in  1 79 1  were  then  reviewed  and  determined,  and  since 
it  was  the  first  comprehensive  exposition  of  the  scope 
and  principles  of  the  Constitution,  I  insert  here  the 
syllabus  and  excerpts  from  the  opinion  by  Chief  Justice 
Marshall. 


Supreme 
Court  on 
bank 
charter. 


SYLLABUS 
McCulloch  vs.  Maryland,  4  Wheaton  413 


"  Congress  has  power  to  incorporate  a  bank. 

"  The  government  of  the  Union  is  the  government  of  the 
people ;  it  emanates  from  them ;  its  powers  are  granted  by 
them,  and  are  to  be  exercised  directly  on  them  and  for  their 
benefit. 

"  The  government  of  the  Union,  though  limited  in  its  powers, 
is  supreme  within  its  sphere  of  action,  and  its  laws,  when  made 
in  pursuance  of  the  Constitution,  form  the  supreme  law  of  the 
land. 

"  There  is  nothing  in  the  Constitution  of  the  United  States, 
similar  to  the  articles  of  confederation,  which  excludes  inciden- 
tal or  implied  powers. 
Power  of  "  If  the  end  be  legitimate  and  within  the  scope  of  the  Con- 

Congress  set  stitution,  all  the  means  which  are  appropriate,  which  are  plainly 
adapted  to  that  end,  and  which  are  not  prohibited,  may  consti- 
tutionally be  employed  to  carry  it  into  effect. 

"The  power  of  establishing  a  corporation  is  not  a  distinct 
sovereign  power  or  end  of  government,  but  only  the  means  of 
carrying  into  effect  other  powers  which  are  sovereign.  When- 
ever it  becomes  an  appropriate  means  of  exercising  any  of  the 


THE  PAPER   CURRENCY 


67 


powers   given  by  the  Constitution  to  the  government  of  the 
Union,  it  may  be  exercised  by  that  government. 

"  If  a  certain  means  to  carry  into  effect  any  of  the  powers   Implied 
expressly  given  by  the  Constitution  to  the  government  of  the  Powers- 
Union,  be  an  appropriate  measure,  not  prohibited  by  the  Con- 
stitution, the  degree  of  its  necessity  is  a  question  of  legislative 
discretion,  not  of  judicial  cognizance. 

"  The  act  of  ioth  April,  1816,  c.  44,  to  '  incorporate  the  sub- 
scribers to  the  Bank  of  the  United  States,'  is  a  law  made  in 
pursuance  of  the  Constitution.  The  Bank  of  the  United  States 
has,  constitutionally,  a  right  to  establish  its  branches,  or  offices 
of  discount  and  deposit,  within  any  state. 

"  The  state  within  which  such  branch  may  be  established  States  can- 
cannot,  without  violating  the  Constitution,  tax  that  branch.  not  tax  bank* 

"  The  state  governments  have  no  right  to  tax  any  of  the  con- 
stitutional means  employed  by  the  government  of  the  Union  to 
execute  its  constitutional  powers. 

"The  states  have  no  power,  by  taxation  or  otherwise,  to 
retard,  impede,  burden,  or  in  any  manner  control,  the  opera- 
tions of  the  constitutional  laws  enacted  by  Congress,  to  carry 
into  effect  the  powers  vested  in  the  national  government. 

"This  principle  does  not  extend  to  a  tax  paid  by  the  real 
property  of  the  Bank  of  the  United  States,  in  common  with 
the  other  real  property  in  a  particular  state,  nor  to  a  tax 
imposed  on  the  proprietary  interest  which  the  citizens  of  that 
state  may  hold  in  this  institution,  in  common  with  other 
property  of  the  same  description  throughout  the  state." 


The  Chief  Justice  said  :  — 

"Although  among  the  enumerated  powers  of  government,  Express 

we  do  not  find  the  word  '  bank  '  or  '  incorporation,'  we  find  the  P°wers  imP'y 

,  ,        „  ,  others, 

great  powers  to  lay  and  collect  taxes,  to  borrow  money,  to 

regulate  commerce,  to  declare  and  conduct  a  war,  and  to  raise 

and  support  armies  and  navies.  ...     A  government  entrusted 

with  such  ample  powers,  on  the  due  execution  of  which  the 

happiness  and  prosperity  of  the  nation  so  vitally  depends,  must 

also  be  entrusted  with  ample  means  for  their  execution.  .  .  . 

"  The  government  which  has  a  right  to  do  an  act  and  has 

imposed  on  it  the  duty  of  performing  that  act,  must,  according 


68 


CONTEST  FOR  SOUND  MONEY 


Necessary 
means  at 
discretion  of 
Congress. 


to  the  dictates  of  reason,  be  allowed  to  select  the  means,  and 
those  who  contend  that  it  may  not  select  any  appropriate 
means,  that  one  particular  mode  of  effecting  the  object  is 
excepted,  take  upon  themselves  the  burden  of  establishing  that 
exception.  .  .  . 

"  But  the  Constitution  of  the  United  States  has  not  left  the 
right  of  Congress  to  employ  the  necessary  means  for  the  execu- 
tion of  the  powers  conferred  on  the  government,  to  general 
reasoning.  To  its  enumeration  of  powers  is  added  that  of 
making  '  all  laws  which  shall  be  necessary  and  proper  for 
carrying  into  execution  the  foregoing  powers,  and  all  other 
powers  vested  by  this  Constitution  in  the  government  of  the 
United  States  or  in  any  department  thereof.'  .  .  . 

"  The  word  '  necessary '  is  considered  (by  counsel  for  the 
state)  as  controlling  the  whole  sentence,  and  as  limiting  the 
right  to  pass  laws  for  the  execution  of  the  granted  powers,  to 
such  as  are  indispensable,  and  without  which  the  power  would 
be  nugatory.  That  it  excludes  the  choice  of  means  and  leaves 
to  Congress  in  each  case  that  only  which  is  most  direct  and 
simple.  Is  it  true  that  this  is  the  sense  in  which  the  word 
'  necessary '  is  always  used  ? 


"To  employ  the  means  necessary  to  an  end  is  generally 
understood  as  employing  any  means  calculated  to  produce  the 
end,  and  not  as  being  confined  to  those  single  means  without 
which  the  end  would  be  entirely  unattainable. 


Necessity   to 
be  broadly 
construed. 


"  To  have  declared  that  the  best  means  shall  not  be  used, 
but  those  alone  without  which  the  power  given  would  be 
nugatory,  would  have  been  to  deprive  the  legislature  of  the 
capacity  to  avail  itself  of  experience,  to  exercise  its  reason, 
and  to  accommodate  its  legislation  to  circumstances. 


Examples 
from  other 
provisions. 


"Take,  for  example,  the  power  'to  establish  post  offices 
and  post  roads.'  This  power  is  executed  by  the  single  act  of 
making  the  establishment.  But,  from  this  has  been  inferred 
the  power  and  duty  of  carrying  the  mails  along  the  post  road, 
from  one  post  office  to  another,  and,  from  this  implied  power, 
has  again  been  inferred  the  right  to  punish  those  who  steal 


THE  PAPER   CURRENCY 


69 


letters  from  the  post  office  or  rob  the  mail.  It  may  be  said, 
with  some  plausibility,  that  the  right  to  carry  the  mail  and  to 
punish  those  who  rob  it  is  not  indispensably  necessary  to  the 
establishment  of  a  post  office  and  post  road.  This  right  is 
indeed  essential  to  the  beneficial  exercise  of  the  power  but  not 
indispensably  necessary  to  its  existence. 


If  appropri- 
ate and  not 
prohibited. 


"  All  admit  the  constitutionality  of  a  territorial  government, 
which  is  a  corporate  body. 

"  If  a  corporation  may  be  employed  indiscriminately  with 
other  means  to  carry  into  execution  the  powers  of  the  govern- 
ment, no  particular  reason  can  be  assigned  for  excluding  the 
use  of  a  bank,  if  required  for  its  fiscal  operations.  To  use  one 
must  be  within  the  discretion  of  Congress,  if  it  be  an  appro- 
priate mode  of  executing  the  powers  of  government.  That  it 
is  a  convenient,  a  useful  and  essential  instrument  in  the  prose- 
cution of  its  fiscal  operations,  is  not  now  a  subject  of  controversy. 
All  those  who  have  been  concerned  unite  in  representing  its 
importance  and  necessity,  and  so  strongly  have  they  been  felt 
that  statesmen  of  the  first  class  whose  previous  opinions  against 
it  had  been  confirmed  by  every  circumstance  which  can  fix  the 
human  judgment,  have  yielded  those  opinions  to  the  exigencies 

of  the  nation. 

********** 

"  It  can  scarcely  be  necessary  to  say  that  the  existence  of  Choice  of 
state  banks  can  have  no  possible  influence  on  the  question. 
No  trace  is  to  be  found  in  the  Constitution  of  an  intention  to 
create  a  dependence  of  the  government  of  the  Union  on  those 
of  the  states  for  the  execution  of  the  powers  assigned  to  it. 
Its  means  are  adequate  to  its  ends,  and  on  those  means  alone 
was  it  expected  to  rely  for  the  establishments  of  its  ends.  To 
impose  on  it  the  necessity  of  resorting  to  means  which  it  can- 
not control,  which  another  government  may  furnish  or  withhold, 
would  render  its  course  precarious,  the  result  of  its  measures 
uncertain,  and  create  a  dependence  on  other  governments 
which  might  disappoint  its  most  important  designs,  and  is 
incompatible  with  the  language  of  the  Constitution.  But  were 
it  otherwise,  the  choice  of  means  implies  a  right  to  choose  a 
national  bank  in  preference  to  state  banks,  and  Congress  alone 
can  make  the  selection." 


means  in 
Congress. 


7o 


CONTEST  FOR  SOUND  MONEY 


The  first 
bank's  char- 
ter. 


Note  issues. 


Branches. 


The  charter  was  an  exclusive  one  for  twenty  years.1 
The  capital  was  fixed  at  $10,000,000  divided  into  shares 
of  $400  each,  the  government  taking  one-fifth.  Small 
investors  in  the  shares  were  protected  by  being  given  a 
relatively  greater  voting  power,  and  no  one  was  allowed 
to  cast  more  than  thirty  votes  ;  foreign  shareholders 
had  no  votes.  Twenty-five  directors  were  to  govern 
the  institution.  The  government's  shares  were  to  be 
paid  for  with  money  borrowed  from  the  bank,  repayable 
in  instalments.  No  specific  authority  to  issue  notes 
was  conferred,  this  being  apparently  understood  to  exist 
without  a  special  proviso,  but  other  parts  of  the  act 
referred  to  the  notes  to  be  issued,  and  the  notes  were 
to  be  included  in  the  liabilities.  The  notes  and  other 
debts  (exclusive  of  deposits)  were  not  to  exceed  the 
capital  of  the  bank,  directors  being  liable  for  such 
excess.  Furthermore,  the  notes  while  payable  on  de- 
mand in  coin  were  to  be  "  receivable  in  all  payments 
to  the  United  States."  Branches  were  authorized  to 
be  opened  at  any  place  in  the  United  States,  and  the 
Secretary  of  the  Treasury  was  empowered  to  require 
reports  and  to  inspect  the  general  accounts  upon  which 
such  reports  were  based.  The  bank  was  not  allowed 
to  hold  real  estate  beyond  that  necessary  for  offices, 
etc.,  unless  acquired  in  satisfaction  of  preexisting  debt. 
It  was  prohibited  from  loaning  more  than  $100,000  to 
the  United  States  or  more  than  $50,000  to  any  state, 
or  making  any  loans  to  a  foreign  prince  or  state,  unless 
sanctioned  by  Congress.  It  was  not  permitted  to  deal 
in  stocks  and  bonds  (except  to  sell  those  it  acquired  at 
the  outset),  or,  generally,  in  anything  but  bills  of  ex- 
change and  bullion,  nor  was  it  to  charge  more  than  6 
per  cent  upon  loans  or  discounts.  A  very  important 
provision  was  that  three-fourths  of  the  stock  had  to  be 

1  See  the  act  in  Appendix. 


operations. 


THE  PAPER   CURRENCY  Ji 

paid  for  in  6  per  cent  bonds  of  the  United  States  then 
being  issued.  Thus  the  government  was  to  be  materi- 
ally assisted  at  the  outset  in  floating  its  loans. 

The  stock  of  the  bank  was  considerably  oversub- 
scribed in  two  hours  after  the  books  were  opened. 

The  bank  began  business  in  Philadelphia,  branches  its 
being  eventually  opened  in  New  York,  Boston,  Balti- 
more, Washington,  Norfolk,  Charleston,  Savannah,  and 
New  Orleans.  The  government  almost  immediately 
became  a  borrower  from  the  bank,  and  ultimately  it  was 
compelled  to  realize  upon  its  shares  in  the  bank  to  re- 
pay part  of  the  debt.  In  1802  it  ceased  to  be  a  share- 
holder, having,  however,  realized  a  net  profit  of  nearly 
57  per  cent  upon  its  investment. 

No  reports  of  the  bank's  condition  seem  to  have  been  Reports  of 
required  by  the  Treasury,  and  only  two  reports  are 
known  to  exist,  having  been  communicated  to  Congress 
by  Secretary  Gallatin  in  1809  and  18 n.1  The  rate  of 
dividend  paid  (in  excess  of  8  per  cent)  indicates  that  it 
was  a  very  successful  enterprise,  besides  having  been 
of  incalculable  benefit  to  the  government  in  its  most 
trying  days  during  the  period  under  review.  From  the 
reports  in  question  it  is  gleaned  that  its  circulation  was 
$4,500,000  to  $5,000,000,  individual  deposits  $8,500,000 
in  1809  and  $5,900,000  in  181 1,  loans  about  $15,000,000, 
specie  about  $5,000,000.  The  latter  of  the  two  reports 
was  for  a  date  within  a  few  months  of  the  expiration  of 
its  charter. 

Aside  from  the  service  to  the  government  which  the 
bank  performed  admirably,  as  testified  to  by  Gallatin, 
Jefferson's  Secretary  of  the  Treasury,  it  exercised  a 
most  salutary  influence  upon  the  currency.  Its  own 
issues  were  never  very  large  compared  with  its  specie 
reserve,  it   issued   no   notes  under  ten    dollars,  and   it 

1  Gallatin's  Reports,  Finance  Reports,  Vol.  I. 


72 


CONTEST  FOR  SOUND  MONEY 


Gallatin  on 
the  national 
bank. 


Efforts  to 

renew 

charter. 


checked  undue  expansion  on  the  part  of  the  state  banks, 
which  now  were  increasing  in  number  annually,  by  forc- 
ing redemption  in  specie  when  occasion  warranted.1 

Although  the  charter  was  not  to  expire  until  1811,  a 
petition  from  the  bank  for  its  renewal  was  presented  to 
Congress  early  in  1808.  It  was  referred  to  committees, 
and  Gallatin  was  directed  to  submit  his  views  on  the 
subject.  He  favored  a  new  charter  rather  than  a  re- 
newal, but  was  unquestionably  favorable  to  the  use  of 
such  a  bank,  particularly  for  the  collection,  safe  keep- 
ing, and  transmission  of  public  moneys,  and  as  an  aid  to 
the  government  in  respect  to  loans.2  The  strongest 
objection  to  the  renewal  was  the  fact  that  $7,200,000  of 
the  $10,000,000  capital  was  owned  abroad.  He  there- 
fore recommended  a  national  bank,  capital  $30,000,000, 
two-sixths  to  go  to  the  shareholders  of  the  existing  bank, 
three-sixths  to  the  United  States  and  the  states,  and 
one-sixth  to  the  public,  both  the  federal  and  the  state 
governments  to  have  a  voice  in  the  direction  ;  the  United 
States  to  receive  interest  on  its  deposits  in  excess  of 
$3,000,000,  and  in  emergencies  to  be  accommodated  with 
loans  to  the  extent  of  $18,000,000  at  6  per  cent. 

In  18 10  a  committee  reported  a  bill  upon  the  lines 
indicated  by  Gallatin,  simply  grafting  the  new  features 
on  Hamilton's  act  of  1791.3  Subsequently  another  bill 
was  reported  to  renew  the  charter  for  twenty  years  with 
some  such  modifications  as  recommended -by  Gallatin, 
excluding  the  participation  of  the  states.  In  January, 
181 1,  Gallatin  submitted  the  second  of  the  reports  of 
the  condition  of  the  bank,  already  referred  to.  Another 
bill  for  renewal  was  introduced  and  pressed.  An  ex- 
tended debate  ensued,  in  the  course  of  which  the  entire 
question  was  thoroughly  discussed.     Much  of  the  oppo- 


1  Gallatin's  Reports,  Finance  Reports,  Vol.  I. 

3  Clarke  and  Hall,  History  of  Bank  of  United  States. 


2  Ibid. 


THE  PAPER   CURRENCY  73 

sition  was   based  on  constitutional  objections.     In  the  Renewal  of 

charter 
defeated. 


House  the  bill  was  defeated  by  the  close  vote  of  65  to  c 


64.  In  the  Senate  Crawford  (afterwards  Secretary  of 
the  Treasury)  favored  the  renewal,  in  a  strong  report, 
believing,  like  Gallatin,  in  the  great  practical  utility  of 
the  bank.  He  obtained  from  Gallatin  a  forcible  plea 
for  his  bill,  in  which  the  inability  of  state  banks  to  serve 
the  desired  purpose  was  conclusively  shown.  Crawford 
pointed  out  that  despite  the  admitted  usefulness  of  the 
bank  and  its  influences  upon  the  country's  prosperity, 
the  legislators  were  being  carried  away  by  the  supposed 
public  sentiment  against  the  bank.  Henry  Clay  opposed 
the  bill  upon  constitutional  grounds ;  he  also  appears  to 
have  been  afraid  of  foreign  control.  The  vote  in  the 
Senate  was  1 7  to  17,  and  Vice-President  George  Clinton 
gave  the  casting  vote  against  the  bill.  So  renewal  was 
defeated.  A  petition  from  the  bank  for  a  brief  exten- 
sion in  order  to  wind  up  its  affairs  was  likewise  nega- 
tived. Clay  in  the  Senate  made  the  committee  report 
against  the  petition,  saying  that  inasmuch  as  the  original 
act  was  unconstitutional,  any  extension  would  be  equally 
so.  In  the  House  the  same  reason  was  given  for 
refusal.1 

The  assets  of  the  institution  were  acquired  by  Stephen 
Girard,  who  continued  the  business  in  Philadelphia  as 
Girard's  Bank,  which  still  flourishes  there  under  a 
national  charter. 

In  the  final  liquidation  it  paid  $434  for  each  of  its  Liquidation 
$400  shares,  after  having  paid  dividends  averaging  8£  of  the  bankl 
per  cent.2 

In  1784  there  were  but  three  state  banks  with  a  capi- 
tal of  $2,100,000.  From  the  meagre  reports  available  it 
is  gathered  that  the  number  increased  by  1800  to  28 

1  Clarke  and  Hall,  History  of  Bank  of  United  States. 

2  Knox,  History  of  Banking. 


74  CONTEST  FOR  SOUND  MONEY 

with  $21,300,000  capital,  in  1805  there  were  75  with 
over  $40,000,000  of  capital,  and  in  181 1  there  were  88 
with  nearly  $43,000,000  of  capital.  Of  these  last  men- 
tioned 47  with  $12,200,000  capital  were  in  New  Eng- 
land, where  the  laws  imposed  wholesome  regulation, 
particularly  in  Massachusetts,  which  required  public  re- 
ports from  1803.  Although  the  systems  in  other  states 
were  with  rare  exceptions  very  carelessly  supervised,  or 
not  at  all,  and  charters  were  granted  as  spoils  of  party 
in  some,  the  circulation  issued  relative  to  the  specie 
holdings  was  not  excessive  in  volume  until  after  181 1.1 
Banks  jn  1806  Vermont  had  organized  a  bank,  with  branches, 

states.  '  owned  and  operated  exclusively  by  the  state.  Ken- 
tucky in  the  same  year,  Delaware  in  1807,  and  North 
Carolina  in  18 10,  each  chartered  a  bank  in  which  the 
state  took  a  substantial  stock  interest.  That  of  Dela- 
ware is  still  in  existence,  under  the  old  charter.2 

Taken  all  together  the  period  covered  by  the  two  dec- 
ades during  which  the  first  United  States  Bank  existed 
was  one  of  prosperity,  perhaps  without  parallel  in  any 
new  country  after  an  impoverishing  war,  and  although 
natural  advantages  and  the  energies  of  the  people  had 
much  to  do  with  this  prosperity,  it  is  but  just  to  give 
credit  to  the  fathers  of  the  Republic  for  their  foresight 
in  laying  its  foundations,  and  especially  to  the  genius  of 
Hamilton,  who  at  the  age  of  32  took  charge  of  the  Treas- 
ury Department,  and  for  about  six  years  had  the  almost 
exclusive  direction  of  the  economic  affairs  of  the 
new  nation.  His  four  reports  on  the  Public  Credit,  the 
Establishment  of  a  Coinage  System,  on  the  Bank,  and 
on  Manufactures  and  Tariff,  constitute  a  monument  to 
the  incomparable  ability  of  this  greatest  of  all  our  finan- 
cial ministers. 

1  See  Crawford's  Report  of  1820,  also  Gallatin,  Currency  and  Banking 
System,  1831.  2  Knox,  History  of  Banking. 


THE  PAPER   CURRENCY 


75 


STATISTICAL   RESUME 

Estimates  of  Bank  Capital  and  Circulation,  and  the  Money  in 
the  Country  for  Various  Dates  to  i8ii 

Compiled  from  Crawford's  Reports  and  Elliot's  Funding  System 
(In  millions  except  in  last  column) 


Banks   (including   Bank  of 
United  States  after  1790) 

Money  Volume 

Number 

Capital 

Circulation 

Specie 

Total 

Population 

Per  Capita 

1784 

3 

2.1 

2.0 

10.0 

I2.0 

3-° 

#4.00 

1790 

4 

2-5 

2-5 

9.0 

"•5 

3-8 

3.OO 

1795 

24 

21.0 

16.O 

19.0 

35-o 

4-5 

7-77 

1800 

29 

3i-3 

15-5 

17-5 

33-o 

5-3 

6.22 

1805 

76 

5°-5 

26.O 

»7-S 

43-5 

6.2 

7.O0 

1811 

89 

52.7 

28.1 

30.0 

58.1 

7-3 

8.00 

It  is  reported  that  in  181 1  the  banks  held  about  $15,000,000  of  specie. 
Statements  purpprting  to  give  specie  holdings  prior  to  that  date  are  mis- 
leading. 


CHAPTER  V 

l8l2  TO  1836 

state  bank  The  currency  history  of  the  country  for  the  quarter- 
currency,  century  following  the  expiration  of  the  charter  of  the 
first  Bank  of  the  United  States  is  divisible  into  three 
almost  equal  periods,  —  the  disorganized  condition  of 
the  currency  during  and  following  the  War  of  1 8 1 2,  and 
the  struggle  for  its  reformation,  which  extended  to  1820; 
a  period  of  sound  currency  under  regulation  by  the 
second  Bank  of  the  United  States  followed  and  con- 
tinued until  1829;  then  began  the  war  upon  the  bank 
resulting  in  the  failure  to  renew  its  charter  and  the 
downfall  and  breaking  up  of  the  system  of  which  the 
bank  had  been  the  controlling  influence. 

Statistics  relating  to  banking  and  currency  from  18 12 
to  1834  are  exceedingly  meagre.  Subsequent  to  1834, 
pursuant  to  a  resolution  of  Congress  directing  the  collec- 
tion and  reporting  of  information,  the  Treasury  reports 
contain  fairly  satisfactory  data.  Secretary  Crawford,1 
and  afterward  ex-Secretary  Gallatin,2  undertook  to  give 
some  comparative  figures  for  certain  years.  For  the 
period  from  1821  to  1828,  inclusive,  the  only  available 
statistics  are  found  in  the  reports  of  the  Massachusetts 
banks  (required  by  state  law  from  1803)  and  those  of 
the  second  Bank  of  the  United  States,  also  required  by 
law. 

1  Report  of  1820,  in  full  in  International  Monetary  Conference,  1878, 
p.  502. 

2  Currency  and  Banking  System,  1831. 

76 


THE  PAPER    CURRENCY  JJ 

The  second  war  with  Great  Britain  began  in  1812. 
The  government  found  it  necessary  to  borrow  money, 
and  as  predicted  by  Hamilton,  Gallatin,  and  Crawford, 
the  state  banks  proved  unequal  to  the  emergency. 
Instead  of  the  anticipated  contraction  of  banking  facili- 
ties after  the  liquidation  of  the  first  bank,  a  rapid  ex-  State  banks, 
pansion  had  taken  place,  but  much  of  the  alleged  bank 
capital  was  fictitious,  a  large  number  of  banks  having 
been  organized  upon  capital  represented  by  notes  of 
hand  of  the  subscribers. 

Crawford  estimated  that  in  the  four  years,  1811-1815, 
the  number  of  banks  increased  from  88  to  208,  the 
capital  from  less  than  $43,000,000  to  over  $88,000,000, 
and  the  circulation  from  $23,000,000  to  $110,000,000. 
In  18 16  there  were  246  banks  with  $89,400,000  capital,  inflation  and 
For  181 7  the  number  of  banks  is  not  given,  but  the 
capital  is  estimated  at  $125,700,000.  In  1820  there 
were  307  banks,  but  the  capital  was  only  $102,100,000. 
Adequate  legal  restrictions  were  wanting  in  most  of  the 
states,  and  notes  were  issued  with  ease  and  without 
regard  to  capital  or  specie  holdings.  In  order  to  in- 
crease the  volume  as  much  as  possible,  since  note-issues 
were  their  principal  means  of  making  loans  and  dis- 
counts, a  mass  of  small  denominations,  some  as  low  as 
six  cents,  were  issued.  Adding  to  this  the  stress  of  war 
and  the  consequent  hoarding  of  specie,  suspension  of 
coin  payments  naturally  followed.  Most  of  the  banks 
outside  of  New  England  suspended  in  August,  18 14. 
The  depreciation  of  Southern  and  Western  bank-notes 
was  most  severe.  At  Baltimore,  where  notes  from 
Southern  banks  were  found  in  greatest  abundance,  the 
discount  on  some  issues  reached  23  per  cent.  In  New 
York  and  Philadelphia  16  per  cent  was  the  maximum 
discount.  Boston  and  New  England  notes  alone  were 
quoted  on  a  par  with  specie.     The  range  of  the  dis- 


y8  CONTEST  FOR  SOUND  MONEY 

counts  by  years  was:  1814,  10  @  20  per  cent;  185 1, 
2  @  2\\  per  cent;  1816,  if  @  23  per  cent;  and  1817, 
the  year  of  resumption,  2\  @  4|  per  cent.  Lack  of 
specific  information  prevented  the  public  from  exer- 
cising a  wise  discrimination,  as  between  banks,  and 
hence  they  discriminated  against  localities.  As  late  as 
1823  discounts  reaching  a  maximum  of  75  per  cent  upon 
notes  of  certain  Kentucky  banks  are  recorded.1 
Treasury  The  f  unds  of  the  government  were  deposited  in  many 

loans.  °f  tnese  banks  throughout  the  country,  and  when  sus- 

pension took  place  amounted  to  $9,000,000.  Congress, 
in  18 12,  had  been  compelled  to  resort  to  an  issue  of 
"Treasury  Notes"  (the  first  since  1 781) to  cover  short 
term  loans.  Five  separate  issues  were  authorized  during 
the  war.  At  first  all  were  interest-bearing,  payable  in 
one  year  and  in  denominations  of  $100  only.  Later 
notes  of  $50,  $20,  and  $5  were  authorized ;  the  $5  notes, 
however,  did  not  bear  interest.  They  were  not  made 
legal  tenders,  the  proposition  to  do  so  having  been 
promptly  defeated ;  but  being  receivable  for  all  public 
dues,  and  payable  to  public  creditors,  they  circulated 
freely.  In  all  $60,500,000  were  authorized,  but  less 
than  $37,000,000  were  actually  issued.2  These  notes 
were  all  funded  into  bonds  or  paid,  except  a  very  few 
which  were  probably  destroyed  or  lost. 

The  government  did  not  succeed  in  disposing  of  its 
obligations  at  par.  An  official  report  shows  that  of  the 
$80,000,000  of  bonds  and  notes  placed  during  the  War 
of  18 12,  owing  to  the  discounts  thereon  and  the  depre- 
ciated currency  received  in  payment  therefor,  the 
Treasury  actually  obtained  only  $34,ooo,ooo.3  In  other 
words,   had  the  Treasury  been  able  to  dispose  of  its 

1  Gouge,  History  of  Paper  Money.  « 

2  Bailey,  National  Loans. 

8  McDufne's  Report  on  Bank  of  United  States,  21st  Congress,  ist  Sess. 


THE  PAPER    CURRENCY  79 

notes  and  bonds  at  par  in  coin,  and  had  its  balances  L°ss 
in  the  various  state  banks  been   available,   a   loan  of  depreciated 
$34,000,000  properly  financed  would  probably  have  cov-  currency. 
ered  the  expenses  of  the  war,  for  which,  ultimately,  the 
people  paid  $80,000,000  and  interest.     Gallatin,  in  re- 
viewing the  period,  expressed  the  opinion  unequivocally 
that,  had  the  Bank  of  the  United  States  been  rechar- 
tered,  suspension  of  specie  payments  would  have  been 
avoided   and  so   this  loss,    enormous  for   that   period, 
would  not  have  been  incurred.1 

Many  of  those  in  Congress  who  had  aided  in  defeat- 
ing the  renewal  of  the  federal  bank  charter  began  to 
see  the  error  of  that  policy.  It  will  be  recalled  that 
a  change  of  one  vote  in  each  House  of  Congress  would 
have  carried  one  of  the  measures  proposed.  Even 
Madison,  now  President,  who  in  1791  was  the  leader 
of  the  opposition  to  the  first  bank  charter,  modified  his 
opinions.  The  "object  lesson  "  had  been  an  instructive 
one. 

Jefferson  advised  Madison  to  propose  the  issue  of 
government  currency,  $20,000,000  annually  so  long 
as  needed,  and  appeal  to  the  states  to  relinquish  the 
right  to  establish  banks  of  issue.2  This  appears  to 
be  the  first  important  suggestion  for  a  government 
note-issue. 

Early  in  18 14  New  York  members  in  Congress  pre-  National 
sented  a  petition  for  the  establishment  of  a  national  posed.*3™ 
bank  with  a  capital  of  $30,ooo,ooo.3  The  House  Com- 
mittee reported  adversely,  upon  constitutional  grounds. 
Calhoun,  then  a  representative  from  South  Carolina, 
endeavored  to  have  such  a  bank  established  in  the  Dis- 
trict of  Columbia,  which,  being  under  exclusive  federal 

1  Gallatin,  Currency  and  Banking  System. 

2  Bolles,  Financial  History  of  United  States. 

8  Qarke  and  Hall,  Documentary  History  of  Bank  of  United  States. 


plan 


80  CONTEST  FOR  SOUND  MONEY 

jurisdiction,  made  the  measure  constitutional.  A  bill 
for  this  purpose  was  reported  in  February,  but  was  soon 
dropped.  In  October  the  Secretary  of  the  Treasury, 
A.  J.  Dallas,  upon  request  from  the  House  Committee 
on  Ways  and  Means  to  furnish  suggestions  for  the 
maintenance  of  the  public  credit,  submitted  a  report1 
strongly  favoring  a  national  bank.  Jeffersonian  though 
he  was,  and  in  the  cabinet  of  Madison,  Dallas  said  that 
if  after  twenty  years  of  tacit  sanction  of  the  old  bank 
charter  the  Constitution  had  not  been  amended  upon 
this  question,  he  considered  himself  justified  in  regard- 
ing it  settled  in  favor  of  the  constitutionality  of  the 
charter.  He  regarded  such  an  institution  "  the  only 
efficient  remedy  for  the  disordered  condition  of  our  cir- 
Daiias's  culating  medium."    He  recommended  a  $50,000,000 bank, 

two-fifths  of  the  capital  to  be  taken  by  the  United  States, 
$6,000,000  to  be  paid  in  specie  by  outside  subscribers, 
$24,000,000  in  the  recent  issues  of  public  debt,  and  the 
$20,000,000  taken  by  the  United  States  to  be  also  paid 
for  in  such  obligations ;  the  bank  to  loan  the  govern- 
ment $30,000,000,  and  the  government  to  have  five  of 
the  fifteen  directors  and  the  right  of  inspection. 

Calhoun  proposed  a  substitute  bill  providing  that  all 
the  shares  were  to  be  open  to  public  subscription,  and 
omitting  the  required  loan  to  the  government.  Another 
bill,  containing  a  clause  permitting  the  bank  to  suspend 
coin  payments  during  the  war,  was  introduced.  The 
suspension  clause  was  rejected  by  the  casting  vote  of 
Speaker  Langdon  Cheves  (afterwards  president  of  the 
second  bank).  Daniel  Webster,  with  his  accustomed 
vigor  and  eloquence,  also  opposed  the  suspension  clause. 
Amended  in  various  particulars  the  bill  finally  passed, 
but  since  the  capital  was  reduced  to  $30,000,000  and  no 
loan  to  the  government  was  provided  for,  Dallas  pro- 

1  Finance  Reports,  Vol.  II. ;   also  Clarke  and  Hall's  History. 


THE  PAPER   CURRENCY  8 1 

nounced  the  measure  inadequate  and  President  Madison 
vetoed  it  on  January  30,  1815.1 

Among  the  objections  urged  by  Madison  was  that  the 
bank  would  be  compelled  to  maintain  coin  payments, 
thus  restricting  note  circulation  and  diminishing  the 
bank's  usefulness  during  the  war  period.2 

The  war  came  to  an  end  soon  thereafter,  but  the  dis- 
ordered condition  of  the  currency  required  attention, 
and    Madison,  at   the   opening   of   the  next  Congress,   Madison 

SU£*?CStS 

December,  181 5,  gave  special  attention  to  the  subject  national 
in  his  message.3  He  referred  to  the  absence  of  specie  amency. 
and  the  need  of  a  substitute;  if  state  banks  could  not 
supply  a  uniform  national  currency,  a  national  bank 
might ;  if  neither  could,  it  might  "  become  necessary 
to  ascertain  the  terms  upon  which  the  notes  of  the  Gov- 
ernment (no  longer  required  as  an  instrument  of  credit) 
shall  be  issued,  upon  motives  of  general  policy,  as  a 
common  medium  of  circulation."  The  exigency  must 
have  been  great  indeed  to  produce  such  a  change  of 
views  since  the  days  when  he  sat  in  the  Constitutional 
Convention. 

Dallas  in  his  annual  report  for  181 5  again  discussed 
the  subject,  concluding  that  "  the  establishment  of  a 
national  bank  is  regarded  as  the  best,  and  perhaps  the 
only  adequate  resource  "  ;  believing  that  such  a  bank 
would  aid  and  lead  the  state  banks  in  the  work  of 
restoring  credit,  public  and  private.4  He  recommended 
a  capital  of  $35,000,000,  three-fourths  government  Dallas's 
bonds,  one-fourth  specie  (the  capital  to  be  afterwards 
augmented  to  $50,000,000  by  Congress,  the  additional 

1  Clarke  and  Hall,  History  of  Bank  of  United  States.  Messages  of  Presi- 
dents, Vol.  I. 

2  Messages  of  Presidents,  Vol.  I.  8  Ibid. 

4  Clarke  and  Hall,  History  of  Bank  of  United  States,  also  Finance 
Reports,  Vol.  II. 

G 


82 


CONTEST  FOR  SOUND  MONEY 


Congres- 
sional action. 


The  second 
bank's   char- 
ter. 


#15,000,000  to  be  taken  by  the  states);  the  United 
States  to  take  #7,000,000  of  the  capital  and  to  have 
one-fifth  of  the  directors;  the  bank  to  pay  #1,500,000 
for  the  charter  out  of  its  earnings.  Suspension  of  coin 
payments  was  not  permitted,  branches  were  allowed, 
and  the  ordinary  government  business  was  to  be  trans- 
acted without  charge. 

Calhoun  reported  a  bill  to  the  House  upon  the  lines 
suggested  by  Dallas.  Webster  desired  to  reduce  the 
capital.  Clay,  now  in  the  House,  favored  the  bill,  ex- 
plaining that  his  former  opposition  in  the  Senate  to  a 
national  bank  was  due  to  supposed  instructions  from  the 
Kentucky  legislature,  to  the  supposed  desire  of  his  con- 
stituents, and  to  his  conviction  that  the  necessity  for 
using  an  implied  constitutional  power  did  not  exist ;  now 
the  case  was  different ;  such  a  bank  was  indispensable 
to  remedy  existing  evils.  The  bill  passed  the  House 
March  14,  18 16,  by  a  vote  of  80  to  71.  It  received 
the  support  of  Calhoun,  Clay,  and  Ingham  (afterwards 
Secretary  of  the  Treasury);  Webster  and  most  of  the 
Whigs  voted  against  it,  objecting  finally  to  the  participa- 
tion of  the  government  in  the  bank.  (The  Jeffersonians 
were  to  have  control.)  The  vote  was  by  no  means  sec- 
tional. The  Senate  passed  the  bill  in  April,  and  it  was 
approved  by  Madison  on  the  10th  of  that  month.1 

The  second  bank's  charter  was  drawn  largely  upon  the 
lines  devised  by  Hamilton  for  that  of  the  first  bank. 
Numerous  provisions  repeat  his  language  word  for  word.2 
The  capital  was  fixed  at  #35,000,000,  three  and  one- 
half  times  that  of  the  first  bank,  with  shares  of  #100 
(instead  of  #400)  each.  The  government  took  one-fifth 
of  the  stock,  paying  for  it  with  its  obligations  in  instal- 
ments, the  last  one  being  paid  in  183 1.     Of  the  remain- 

1  Clarke  and  Hall,  History  of  Bank  of  United  States. 

2  See  the  Appendix. 


THE  PAPER    CURRENCY  83 

ing  $28,000,000,  one-fourth  was  to  be  paid  for  in  specie, 
the  balance  in  specie  or  government  bonds,  in  three 
equal  half  yearly  instalments.  No  single  subscription 
for  more  than  three  thousand  shares  was  to  be  accepted 
unless  the  full  amount  was  not  taken  on  the  date  fixed. 
The  restrictions  upon  voting  shares  which  the  first 
charter  contained,  were  repeated.  There  were  twenty- 
five  directors,  as  in  the  first  bank,  but  now  the  govern- 
ment had  one-fifth  of  the  board,  to  be  appointed  by  the 
President. 

In  lieu  of  making  a  loan  to  the  government,  the  bank  Relations  to 

...  r     .  ,   .  ,        _        the  govern- 

paid  a  bonus  of  $1,500,000,  and  it  was  to  act  as  the  fis-  ment. 
cal  agent  of  the  government,  including  the  transfers  of 
funds,  without  compensation.  The  deposit  of  public 
moneys  was  to  be  made  in  the  bank  and  branches  where 
they  existed,  unless  otherwise  directed  by  the  Secretary 
of  the  Treasury,  and  when  that  officer  gave  such 
directions  he  was  to  report  his  reasons  therefor  to 
Congress.  The  bank  was  empowered  to  establish 
branches  anywhere,  with  a  local  organization,  and  it 
had  to  have  a  branch  in  the  District  of  Columbia  and  in 
every  state  where  two  thousand  shares  of  its  stock  were 
held.  Reports  were  to  be  made  to  the  Secretary  of  the 
Treasury  as  often  as  required,  and  the  bank  was  subject 
to  his  inspection  and  to  that  of  a  committee  of  Congress. 

The  note-issuing  function  was  more  specifically  pro-  Note-issues 
vided  for  than  in  the  first  charter.  Denominations 
under  $$  were  prohibited  and  all  under  $100  were  to  be 
payable  to  bearer  on  demand.  The  suspension  of  coin 
payments  of  notes  and  deposits  was  prohibited,  subject 
to  a  penalty  of  12  per  cent  per  annum.  As  in  the  old 
charter  the  liabilities,  other  than  for  deposits  (there- 
fore including  note-issues)  were  not  to  exceed  the  amount 
of  the  capital,  unless  authorized  by  Congress,  and 
directors   were  personally  liable  for  any  excess.     The 


84  CONTEST  FOR  SOUND  MONEY 

notes  of  the  bank  were  to  be  receivable  in  all  payments 
to  the  United  States. 

The  provisions  relative  to  the  holding  of  real  estate, 
dealing  in  anything  but  exchange  and  bullion',  and  de- 
manding more  than  6  per  cent  upon  loans,  were  the 
same  as  in  the  old  charter.  The  sale  of  the  govern- 
ment bonds  held  by  the  bank  was  limited  to  $2,000,000 
a  year,  and  if  sold  in  this  country  they  were  first  to  be 
offered  to  the  government  at  current  rates.  Congress 
agreed  further  to  incorporate  no  other  banks,  except  in 
the  District  of  Columbia,  during  the  life  of  the  charter. 
The  shares  were  not  fully  subscribed  at  once,  and 
Stephen  Girard  ultimately  took  the  remnant  of  30,383 
shares. 

Opening  of         The  bank  opened  for  business  on  January  17,  18 17. 

bank.  The  second  instalment  of  subscriptions  to  shares  was 

then  due,  but  neither  this  nor  the  third  was  paid  in 
according  to  the  charter.  The  bank  received  less  than 
$2,000,000  (instead  of  $7,000,000)  in  specie,  having 
accepted  promissory  notes  and  bank-notes  in  lieu  of 
coin.  Consequently  the  bank  was  compelled  in  18 18  to 
import  specie.  The  officers  permitted  the  transfer  of 
the  shares  upon  the  books  of  the  bank  before  they  were 
fully  paid  for.  A  number  of  the  officers  and  directors 
speculated  in  the  stock  of  the  bank,  discounting  their 
loans  for  the  purpose  at  the  bank  or  its  branches.  The 
first  two  years'  operations  showed  losses,  due  largely  to 
this  speculation,  of  more  than  $3,500,000;  nevertheless 
it  paid  dividends.1 

investigation  On  November  30,  18 18,  the  House  of  Representatives 
appointed  a  committee  to  investigate  the  bank's  affairs. 
In  its  report  made  by  John  C.  Spencer,  afterwards 
Secretary  of  the  Treasury,  in  February  following,  the 

1  House  Reports,  15th  Congress,  2d  Sess.     See  also  Cheves's  Report  in 
Goddard's  History  of  Banks,  1831,  p.  106. 


of  irregulari- 
ties. 


THE  PAPER    CURRENCY  85 

speculations  and  other  derelictions  above  referred  to 
were  published.1  The  bank  was  nearly  insolvent  and 
had  violated  its  charter,  nevertheless  the  House  re- 
fused to  declare  it  forfeited,  preferring  that  the  share- 
holders correct  the  mismanagement.  In  March,  18 19, 
Langdon  Cheves  became  president,  and  under  his  able 
and  conservative  administration,  covering  four  years, 
the  evils  were  corrected  and  the  bank  became  very 
prosperous.  From  1823  to  the  expiration  of  the  charter 
Nicholas  Biddle  was  president  of  the  institution. 

Coin  payments  were  not  at  once  restored.  Secretary  Resumption 
Dallas  had  endeavored,  but  without  success,  to  prepare  payments, 
the  way  in  18 16,  by  urging  the  state  banks  to  resume,2 
but  the  existing  conditions  were  very  profitable  to  them, 
and  they  were  not  inclined  to  do  so.  The  greater  their 
note-issues  and  the  longer  specie  resumption  was  de- 
layed, the  larger  would  be  their  dividends.  In  Octo- 
ber, 1 8 16,  Dallas  was  succeeded  by  Crawford,  who 
continued  the  efforts  for  resumption  and  finally  suc- 
ceeded in  having  July  1,  18 17,  fixed  as  the  date  for 
its  beginning.  Crawford  felt,  however,  that  the  bank's 
assistance  was  requisite,  and  accordingly  influenced  it 
to  negotiate  an  agreement  with  the  state  banks  in  the 
principal  cities,  to  resume  on  February  20  instead  of 
July  1. 

This  proved  easier  said  than  done.     The  country  was  Difficulties 

encountered. 

unquestionably  short  of  specie.  The  bank  could  not, 
as  has  been  stated,  obtain  its  required  quota  without 
importation,  and  there  appears  to  have  been  a  premium 
on  foreign  exchange  the  greater  part  of  the  years  18 17 
and  1818,  so  that  the  imported  specie  promptly  returned 
abroad.  This  served  to  aid  the  state  banks  to  continue 
redundant  paper  issues.     The  Spencer  committee  laid 

1  House  Reports,  1 5th  Congress,  2d  Sess. 

2  Finance  Reports,  Vol.  II. 


86 


CONTEST  FOR  SOUND  MONEY 


Violent  con- 
traction of 
currency. 


a  large  portion  of  the  blame  for  this  upon  the  bank, 
declaring  that  its  measures  were  not  sufficiently  vigor- 
ous. The  problem  which  confronted  the  bank  was, 
however,  a  formidable  one.  The  Treasury  had  turned 
over  to  it  nearly  $i  1,000,000  of  "  public  deposits  "  from 
the  state  banks,  consisting  largely  of  depreciated  paper. 
Specie  resumption  meant  contraction  of  state  bank  cir- 
culation and  serious  curtailment  of  credits  which  they 
had  extended.  The  United  States  Bank  could  not, 
owing  to  its  lack  of  strength  in  specie,  safely  supply 
the  credit  thus  curtailed,  and  at  the  same  time  main- 
tain coin  payments.  A  too  rapid  contraction  nec- 
essarily tended  to  precipitate  disaster.  While  the 
management  of  the  bank  in  the  first  and  second 
years  of  its  existence  was  open  to  serious  criticism 
(the  speculative  tendency  of  the  time  having  un- 
questionably influenced  many  of  those  who  had  the 
business  in  charge),  some  of  the  subsequent  currency 
difficulties  might  have  been  avoided  if  the  bank's  policy 
of  compelling  the  gradual  retirement  of  state  bank- 
notes had  been  continued. 

Nevertheless,  in  obedience  to  the  desire  of  Congress, 
the  bank  acted  more  vigorously.  The  volume  of  notes 
in  the  country,  which  in  181 5  stood  at  $110,000,000, 
and  probably  higher  in  18 16  and  1817,  was  reduced  by 
the  end  of  18 19  to  $45,000,000. x  The  volume  of  specie 
was  practically  unchanged.  Loans  were  violently  con- 
tracted, prices  necessarily  fell  seriously,  "  hard  times  " 
came  upon  the  land  and  propositions  to  issue  govern- 
ment paper,  as  is  usual  under  such  conditions,  were 
numerous.  Secretary  Crawford,  asked  by  the  House 
of  Representatives  for  his  views  upon  this  as  well  as 
the  general  subject  of  the  currency,  vigorously  and  suc- 

1  See  Crawford's  Report,  in  International  Monetary  Conference,  1878, 
p.  502. 


THE  PAPER   CURRENCY  87 

cessfully  opposed  the  propositions.  Without  discussing 
the  question  of  the  constitutionality  of  such  a  measure, 
which  he  assumed  was  not  intended  to  be  put  before 
him,  he  asserted  that  "as  a  measure  of  alleviation,  it 
will  be  more  likely  to  do  harm  than  good,"  pointing  out, 
as  if  he  had  lived  through  the  later  period  when  a  simi- 
lar policy  prevailed  (1 862-1 879),  the  effects  of  such 
a  paper  currency  upon  practically  all  lines  of  human 
activity. 

Much  of  the  disturbance  during  this  period  was  no  Domestic 
doubt  due  to  the  great  fluctuation  in  exchange  be-  exc  anges* 
tween  the  states  of  the  East,  and  those  of  the  West 
and  South.  The  latter,  owing  largely  to  their  limited 
and  widely  distributed  population,  were  continually  at  a 
disadvantage,  and  this  condition  was  largely  responsible 
for  the  unstable  character  of  the  banks  in  those  sections 
and  the  resulting  discount  on  their  notes.  The  govern- 
ment drew  large  sums  from  the  people  in  those  states  in 
payment  for  public  lands,  whereas  the  bulk  of  the  dis- 
bursements were  made  in  the  East.  The  bank  en- 
deavored to  alleviate  this  condition  by  redeeming  its 
notes,  no  matter  where  issued,  at  any  of  its  branches  at 
par,  thus  affording  a  medium  of  exchange  available  Banken- 
throughout  the  country.  It  was  compelled  to  modify  reguiate. 
this  policy  in  18 18,  when  it  found  that  the  operation 
caused  embarrassment,  serious  enough  to  threaten 
suspension.1  Its  notes  thereupon  depreciated  some- 
what excepting  as  to  the  three  New  England  branches ; 
but  the  amount  of  depreciation  was  inconsiderable, 
ranging  from  1  per  cent  in  the  early  years  to  ^  and  ^ 
per  cent  later.  All  notes  were  redeemed  at  Phila- 
delphia as  well  as  at  the  places  of  issue  ;  notes  of  five 
dollars  were  redeemed  at  all  offices,  and  at  times  all 

1  Cheves's  Report  in  Goddard's  History  of  Banks. 


88 


CONTEST  FOR  SOUND  MONEY 


Branch 
drafts. 


Opposition 
to  the  bank. 


notes  were  received  at  all  the  offices  from  individuals, 
but  not  from  banks. 

Another  practice  of  the  bank  which  led  to  criticism 
was  the  issue  of  "  branch  drafts  "  drawn  for  five  dollars, 
ten  dollars,  and  twenty  dollars,  by  the  branches  upon  the 
parent  bank  in  Philadelphia,  which  practically  circulated 
as  notes  of  the  bank  and  were  treated  as  such  in  its  reports. 
This  was  done  at  first  (1826)  to  obviate  the  great  labor 
of  signing  notes  that  the  law  imposed  upon  the  presi- 
dent and  cashier  of  the  parent  bank,  a  task  which  on 
account  of  the  large  volume  of  circulation  they  were 
physically  unable  to  perform,  and  which  Congress,  not- 
withstanding repeated  petitions,  refused  to  alter.1  The 
practice  eventually  became  so  general,  and  partook  so 
much  of  the  nature  of  "  kiting,"  that  it  was  regarded  as 
unwise.  At  one  time  these  drafts  constituted  one-third 
of  the  circulation. 

The  presentation  of  local  bank-notes  for  redemption 
by  the  bank  instead  of  paying  them  out  in  the  regular 
course  of  business,  aroused  antagonism  which  many  of 
the  state  banks  fostered  for  their  own  advantage.  In 
Kentucky,  Ohio,  Georgia,  and  Maryland  particularly, 
the  friction  became  serious.  It  was  upon  the  question 
of  taxing  the  bank  in  the  last-mentioned  state  that  the 
Supreme  Court  upon  appeal  finally  settled  the  contro- 
versy, prohibiting  state  interference  with  the  bank.2 

Nevertheless  in  Ohio  the  bank  was  declared  an  out- 
law for  resisting  exorbitant  taxation,  and  the  entire 
machinery  of  the  state  government  was  used  against  it 
for  a  time.  In  Georgia  a  law  was  passed  virtually 
justifying  creditors  of  the  bank  in  refusing  payment  of 
their  debts  to  it.  Kentucky  passed  "  stay  "  laws  practi- 
cally relieving  debtors  of   their  obligations.     For  pre- 

1  Clarke  and  Hall,  Documentary  History  of  Bank. 

2  McCulloch  vs.  Maryland  ;  see  Chapter  IV.,  ante. 


THE  PAPER   CURRENCY  89 

senting  notes  of  local  banks  for  payment  in  specie,  the 
bank  was  regarded  as  a  criminal;  the  people  there 
seemed  to  think  it  the  duty  of  the  bank  to  lend  its 
capital  to  the  state  banks  without  interest  (by  holding  or 
paying  out  their  notes)  although  many  of  these  local 
banks  were  founded  upon  "  moonshine." 

As  has  been    stated,  the  second  bank   began  under  Cheves 

corrects 

maladministration  calculated  to  defeat  the  object  of  its  mismanage- 
creation.  Its  circulation  in  18 18  had  expanded  to  nearly  ment- 
$10,000,000,  an  amount  not  warranted  by  the  specie  it 
held.  Cheves  corrected  this,  and  under  his  manage- 
ment the  amount  of  the  circulation  exceeded  $6,000,000 
only  in  three  monthly  statements,  the  amount  having 
been  as  frequently  under  as  over  $5,000,000,  and  at 
times  it  held  more  specie  than  the  notes  outstanding. 
The  discounts  showed  a  conservative  policy,  absolutely 
necessary  in  this  critical  period.  In  18 17  the  deposits 
were  usually  in  excess  of  $12,000,000,  continuing  so 
until  near  the  end  of  18 18;  during  Cheves's  term  the 
minimum  was  $4,700,000,  the  maximum  $8,600,000. 

In  September,  18 19  the  bank  had  eighteen  branches, 
of  which  only  five  were  north  of  the  parent  office  at 
Philadelphia,  showing  the  disposition  to  establish  them 
where  they  were  most  needed.  The  Baltimore  branch 
was  the  most  important,  and  five  others  did  a  larger 
business  than  the  branch  at  New  York. 

The  statistics  of  state  banks  prior  to  181 7,  such  as  State  banks' 

1.111  1  •         currency. 

they  are,  show  conclusively  that  the  general  practice 
was  to  organize  banks  mainly  for  the  purpose  of  issuing 
notes,  and  then  exert  political  influence  to  obtain  govern- 
ment deposits.  The  policy  of  having  the  states  interested 
as  shareholders  and  participating  in  the  profits  operated 
to  prevent  the  use  of  restraining  power,  except  in  a  very 
few  states. 

Not  since  the  continental  days  had  the  country  had 


90 


CONTEST  FOR  SOUND  MONEY 


paper. 


Depreciated  SUch  a  wretchedly  bad  circulating  medium  as  from  1812 
to  1 8 19.  It  was  composed  of  a  relatively  small  amount 
of  notes  of  sound  banks,  an  almost  equally  large  amount 
of  counterfeits,  and  a  mass  of  paper  the  value  of  which 
could  rarely  be  known  from  one  day  to  another.  The 
location  of  many  "  banks  "  was  practically  unknown,  and 
many  of  them  had  failed.  Their  notes  were  nevertheless 
in  use ;  others  deliberately  repudiated  their  notes,  still 
others  pretended  falsely  to  redeem  upon  demand.  Other 
corporations  and  tradesmen  issued  "  currency."  Even 
barbers  and  bartenders  competed  with  the  banks  in  this 
respect.  Altogether  it  appears  marvellous  that,  when 
nearly  every  citizen  regarded  it  his  constitutional  right 
to  issue  money,  successful  trade  was  possible  at  all. 

The  influence  upon  public  men  and  Congress  by  in- 
dividuals and  corporations  who  were  profiting  by  the 
demoralized  condition  of  the  currency  is  wonderful, 
almost  incredible.  Politics  of  the  present  time  seem 
pure  compared  with  those  of  that  period. 

Congress  passed  a  resolution  on  April  26,  18 16, 
declaring 


Paper 
money 
and  the 
revenue. 


"That  the  revenues  of  the  United  States  ought  to  be  col- 
lected and  received  in  the  legal  currency  of  the  United  States, 
or  in  Treasury  notes,  or  in  the  notes  of  the  Bank  of  the  United 
States,  as  by  law  provided  and  declared," 


and  requiring  the  Secretary  of  the  Treasury  to  adopt 
such  measures  as  he  deemed  necessary,  to  cause,  as  soon 
as  may  be,  all  taxes  to  be  so  collected  and  paid,  and  that 
after  the  first  day  of  February,  18 17,  no  taxes,  etc., 
"ought  to  be  collected  or  received  otherwise  than  in 
the  legal  currency  of  the  United  States,  or  Treasury 
notes,  or  notes  of  the  Bank  of  the  United  States,  as 
aforesaid." 

Dallas's  successor  (Crawford)  under  the  authority  of 


THE  PAPER  CURRENCY  9 1 

this  resolution,  gently  but  firmly  brought  about  a  reform, 
first  by  persuasion,  ultimately  by  publishing  the  names 
of  the  banks  whose  notes  were  not  to  be  received  for 
public  dues.  The  great  care  exercised  by  him  in  this  The  Treasury 
enormous  task  of  endeavoring  to  obtain  for  the  Treasury  banks, 
the  revenue  to  which  it  was  entitled,  without  precipitat- 
ing a  crisis,  is  shown  in  a  large  volume  of  corre- 
spondence preserved  in  the  annals  of  the  government.1 
Every  possible  subterfuge  to  foist  upon  the  Treasury 
depreciated  and  worthless  paper  was  used.  Notes 
passing  current  in  one  locality  at  par  could  be  paid  out 
by  the  government  in  another  only  at  a  considerable 
discount,  and  in  places  where  local  notes  were  really  at 
par  in  specie  depreciated  paper  imported  from  other 
points  for  the  specific  purpose  was  paid  to  the  Treasury. 
These  devices  in  a  multitude  of  varying  forms  had  to 
be  met  by  Crawford  and  afterwards  by  the  bank.  Ulti- 
mately, however,  they  brought  order  out  of  chaos,  but 
the  losses  were  enormous. 

Gallatin,  writing  in  183 1,  gives  a  list  of  165  banks 
that  failed  between  181 1  and  1830,  most  of  them  un- 
doubtedly "going  to  the  wall"  between  1817  and  1821. 

Crawford  states  in  his  special  report  early  in  1820 
that  the  worst  of  the  troubles  resulting  from  the  war 
and  the  inflation  of  the  currency  had  then  practically 
passed,  and  soon  thereafter  the  monetary  conditions, 
the  industries  of  the  people,  and  the  finances  of  the 
government  gradually  improved.  The  reduction  of  the 
federal  debt  began,  the  antagonism  to  the  bank  disap- 
peared, and  it  prospered  so  that  its  shares  were  at  a 
premium  of  20  to  25  per  cent. 

Sounder  principles  in  local  currency  regulation  began  Reformation 
to  be  introduced.     In  a  number  of  the  states  the  busi- 
ness of  banking  was  placed  under  supervision,  the  issue 
1  American  State  Papers,  Vol.  III. 


92  CONTEST  FOR  SOUND  MONEY 

of  "  currency  "  by  persons  or  associations  not  authorized 
to  do  banking  business  prohibited,  and  penalties  for 
non-redemption  of  notes  were  provided.  The  evil  of 
small  note- issues  was  not  materially  checked,  however.1 
The  policy  of  having  the  states  more  or  less  inter- 
ested in  the  banks  by  the  ownership  of  stock  increased, 
in  most  cases  with  disastrous  results.  The  state  bank 
of  South  Carolina,  owned  entirely  by  the  state,  was 
one  of  the  few  that  made  a  satisfactory  showing  during 
this  period.2 

That  restraining  force  which  legislation  failed  to  pro- 
vide was,  in  New  England,  supplied  by  the  banks  them- 
selves. Profiting  by  the  lesson  taught  by  both  Banks 
of  the  United  States,  Boston  banks  undertook  to  regu- 
late  the   currency   by   compulsory    redemption.      The 

Suffolk  Suffolk  Bank  led  in  this  movement,   and  the  system 

which  developed  was  known  by  its  name.3  Practically 
this  bank,  with  the  cooperation  of  six  other  Boston 
banks,  organized  a  clearing-house  for  notes  of  outside 
institutions,  by  establishing  a  redemption  fund  in  the 
Suffolk  Bank.  The  banks  which  entered  the  system 
would  have  their  notes  received  at  par  in  Boston,  the 
financial  centre,  and  would  be  called  upon  for  redemp- 
tion only  at  specified  periods  by  the  Suffolk,  which 
would  receive  in  redemption,  also  at  par,  any  notes 
of  banks  in  good  standing  in  lieu  of  specie.  Banks 
which  refused  to  enter  the  "  system  "  were  called  upon 
to  redeem  their  notes  in  specie  on  demand.     The  result 

its  effect.  0f  this  SyStem  was  that  banks  which  had  a  redundant 
circulation  were  compelled  to  contract  to  reasonable 
limits.  On  the  other  hand,  the  Boston  redemption  gave 
their  notes  a  more  extended  circulation,  and  the  people 
were   not   subjected   to   the   onerous    discounts   which 

1  Knox,  History  of  Banking  ;   Sumner,  History  of  Banking. 

2  Ibid.  3  D.  R.  Whitney,  The  Suffolk  Bank. 


THE  PAPER   CURRENCY  93 

country  bank-notes  otherwise  suffered  in  the  money 
centres.  This  loss  had  been  from  3  to  5  per  cent.  The 
New  England  Bank  of  Boston  had  reduced  it  to  less 
than  1  per  cent,  the  actual  cost  of  sending  notes  for 
redemption,  but  the  Suffolk  reduced  it  even  more,  so 
that  ultimately  the  cost  was  only  10  cents  per  $1000, 
and  this  was  borne  by  the  banks.1 

These  results  were  not  accomplished  without  much 
opposition.  The  practice  of  making  a  bank  keep  its 
promise  to  pay  specie  when  it  did  not  provide  for  re- 
demption at  Boston  was  deemed  arbitrary,  but  the  com- 
munities securing  a  sound  currency  heartily  approved, 
and  almost  all  of  the  banks  in  New  England  found  it 
to  their  interest  to  enter  the  system. 

The  "  Safety  Fund  System  "  was  adopted  by  statute  Safety  Fund 
in  New  York  State  in  1829,2  when  the  legislature  was  ystem- 
considering  the  renewal  of  a  large  number  of  expiring 
charters.  It  required  the  banks  so  rechartered,  and 
any  others  desiring  to  come  under  the  system,  to  con- 
tribute to  a  joint  fund  for  the  redemption  of  notes  and 
payment  of  deposits  of  any  of  their  number  which 
should  be  overtaken  by  disaster.  The  system  was 
adopted  by  only  a  few  of  the  existing  banks,  and,  as 
will  be  seen  later,  was  not  a  success. 

What  the  Suffolk  system  was  doing  for  New  England, 
the  Bank  of  the  United  States  was  endeavoring  to  ac- 
complish for  the  rest  of  the  country,  particularly  for  the 
South  and  West,  although  necessarily  upon  different 
lines.  It  had  no  redemption  fund,  but  it  was  the  gov- 
ernment fiscal  agent,  and  exercised  the  power  of  regula- 
tion by  means  thereof.  Banks  not  in  good  standing  Regulation 
found  their  notes  rejected  by  government  officers  and 
specie  redemption  was  required  of  them.  Although 
firm  in  these  requirements  to  maintain  notes  at  or  near 

1  Sound  Currency,  Vol.  II.  2  Knox,  History  of  Banking. 


94  CONTEST  FOR  SOUND  MONEY 

par,  the  bank  cultivated  friendly  relations  with  state 
banks  wherever  it  could.  It  received  their  notes,  when 
good,  for  government  dues  and  paid  the  Treasury  drafts 
with  its  own.  Some  of  them  acted  as  its  agents  at 
points  where  it  had  no  branches.  It  continuously  had 
large  balances  with  them  and  carried  their  notes.  In 
1 8 19  the  amount  due  it  from  various  state  banks  was 
over  $2,600,000  on  current  accounts  and  nearly  $1,900,- 
000  on  account  of  their  notes  which  it  held.  Its  own 
circulation  at  the  time  amounted  to  $6,600,000.  In  later 
years  the  total  of  items  due  it  by  state  banks  at  the 
periods  of  its  annual  reports  was  lowest  in  1826  at 
$1,860,000  and  highest  in  1832  at  $6,100,000,  the  aver- 
age being  about  $3,5oo,ooo.1 

The  policy  of  Cheves  to  limit  discounts  and  note- 
issues  was  generally  adhered  to  by  Biddle,  but  as  the 
business  of  the  country  improved,  that  of  the  bank  cor- 
respondingly increased.  The  statement  at  the  end  of 
the  chapter,  giving  the  condition  of  the  bank  annually 
is  one  of  the  most  interesting  exhibits  in  the  monetary 
history  of  the  United  States. 
Operations  The  average  of  deposits  rose  to  $14,500,000  for  the 
period  1 823-1 832,  the  annual  average  never  falling 
below  $10,000,000  and  rising  to  nearly  $23,000,000  in 
1832.  In  that  year  the  "Bank  War"  became  active 
and  the  business  of  the  institution  diminished.  The 
loans  and  discounts  kept  pace  fairly  with  the  deposits, 
the  minimum  being  about  $28,000,000,  the  maximum 
about  $66,000,000  (in  1832).  The  holdings  of  bonds 
and  stocks  reached  a  maximum  in  1825  of  $18,400,000, 
and  diminished  to  nothing  as  the  government  debt  was 
paid  off.2 

The   circulation    of    the   bank,  even  when    "branch 
drafts  "  were  included,  was  never  excessive.     The  maxi- 

1  See  statement  at  end  of  chapter.  2  Ibid. 


THE  PAPER   CURRENCY  95 

mum  prior  to  1836  was  $21,300,000  (1832),  but  up  to 
1824  it  never  exceeded  $6,000,000,  and  the  specie  hold- 
ings were  frequently  in  excess  of  the  notes  until  after 
that  year.  Even  in  the  later  years  (prior  to  1832)  the 
specie  never  fell  below  40  per  cent  of  the  notes  out- 
standing, and  was  usually  in  excess  of  50  per  cent. 

The  evidence  is  conclusive  that  the  bank  was,  after 
reorganization  by  Cheves,  and  particularly  under  Bid- 
die's  regime,  a  strong  institution,  a  valuable  auxiliary  to 
the  government,  a  bulwark  against  rotten  bank-note 
issues,  a  most  serviceable  instrument  to  the  trade  of  the 
country,  and  in  its  international  relations  a  protection 
to  American  industry  and  commerce.  In  his  annual 
report   for    1828 x    Secretary   of    the    Treasury    Rush,  Secretary 

......  .  ,       ,       ,,      .  -  Rush  on  the 

reviewing  his  administration,  sets  forth  all  these  facts,  bank. 
He  said :  — 

"  This  capacity  in  the  Treasury  to  apply  the  public  funds  at 
the  proper  moment  in  every  part  of  a  country  of  such  wide 
extent,  has  been  essentially  augmented  by  the  Bank  of  the 
United  States.  The  department  feels  an  obligation  of  duty 
to  bear  its  testimony,  founded  on  constant  experience  during 
the  term  in  question,  to  the  useful  instrumentality  of  this  insti- 
tution in  all  the  most  important  fiscal  operations  of  the  nation. 
...  It  receives  the  paper  of  the  state  banks  paid  on  public 
account  in  the  interior,  as  well  as  elsewhere,  and  by  placing  it 
to  the  credit  of  the  United  States  as  cash,  renders  it  available 
wherever  the  public  service  may  require.  .  .  .  Such,  also,  is 
the  confidence  reposed  in  the  stock  of  the  Bank  of  the  United 
States,  that  it  serves  as  a  medium  of  remittance  abroad  in  satis- 
faction of  debts  due  from  our  citizens  to  those  of  other  coun- 
tries, which  otherwise  would  make  a  call  upon  the  specie  of  the 
country  for  their  discharge.  Nor  are  these  all  the  uses  of  this 
institution  in  which  the  government  participates.  It  is  the 
preservation  of  a  good  currency  that  can  alone  impart  stability 
to  prosperity,  and  prevent  those  fluctuations  in  its  value,  hurt- 
ful alike  to  individual  and  to  national  wealth.     This  advantage 

1  Finance  Reports,  Vol.  II. 


96 


CONTEST  FOR  SOUND  MONEY 


Its  great 
usefulness. 


Sound 

currency 

provided. 


the  bank  has  secured  to  the  community  by  confining  within 
prudent  limits  its  issues  of  paper,  whereby  a  restraint  has  been 
imposed  upon  excessive  importations,  which  are  thus  kept  more 
within  the  true  wants  and  capacity  of  the  country.  Sometimes 
judiciously  varying  its  course,  it  enlarges  its  issues,  to  relieve 
scarcity,  as  under  the  disastrous  speculations  of  1825.  The 
state  banks  following,  or  controlled  by  its  general  example, 
have  shaped  their  policy  towards  the  same  salutary  ends,  add- 
ing fresh  demonstrations  to  the  truth  that,  under  the  mixed 
jurisdiction  and  powers  of  the  state  and  national  systems  of 
government,  a  national  bank  is  the  instrument  alone  by  which 
Congress  can  effectively  regulate  the  currency  of  the  nation. 
...  A  paper  currency  too  redundant,  because  without  any 
basis  of  coin,  or  other  effective  check,  and  of  no  value  as  a 
medium  of  remittance  or  exchange  beyond  the  jurisdiction  of 
the  state  whence  it  had  been  issued,  a  currency  that  not  unfre- 
quently  imposed  upon  the  Treasury  the  necessity  of  meeting, 
by  extravagant  premiums,  the  mere  act  of  transferring  the  reve- 
nue collected  at  one  point  to  defray  unavoidable  expenditures 
at  another ;  —  this  is  the  state  of  things  which  the  Bank  of  the 
United  States  has  superseded.  In  the  financial  operations  of 
the  Nation,  as  in  the  pecuniary  transactions  between  man  and 
man,  confidence  has  succeeded  to  distrust,  steadiness  to  fluctu- 
ation, and  reasonable  certainty  to  general  confusion  and  risk. 
The  very  millions  of  dollars  not  effective,  of  which  the  Treasury 
for  many  years  has  been  obliged  to  speak,  is  but  a  remnant  of 
the  losses  arising  from  the  shattered  currency,  which  the  bank, 
by  a  wise  management  of  its  affairs,  has  cured." 

In  December,  1827,  a  resolution  to  sell  the  shares  to 
profit  by  the  premium  (then  23 \  per  cent)  was  defeated 
in  the  House  of  Representatives,  only  9  votes  favoring, 
174  opposing.1  The  hostility  seemed  to  have  entirely 
disappeared  under  these  conditions.2  Gallatin  wrote 
that  in  1829  the  currency  of  the  country  was  as  sound 
as  could  be  expected  under  any  system  of  paper  money.3 

1  Abridgment  of  Debates. 

2  Parton,  Life  of  Jackson,  Vol.  III.,  p.  256. 

3  Gallatin's  Writings,  Vol.  III.,  p.  390. 


THE  PAPER   CURRENCY  97 

It  was  therefore  a  surprise  to  the  country  that  Presi-  Jackson 
dent  Jackson  as  early  as   1829,   more  than  six  years  bank. 
before  the  expiration  of  the  bank's  charter,  announced 
his  opposition  to  its  renewal.     The  language  he  used 
in  his  message  to  Congress  was  as  follows  :  — 

"The  charter  of  the  Bank  of  the  United  States  expires  in 
1836,  and  its  stockholders  will  most  probably  apply  for  a  renewal 
of  their  privileges.  In  order  to  avoid  the  evils  resulting  from 
precipitancy  in  a  measure  involving  such  important  principles 
and  such  deep  pecuniary  interests,  I  feel  that  I  cannot,  in 
justice  to  the  parties  interested,  too  soon  present  it  to  the 
deliberate  consideration  of  the  legislature  and  the  people. 
Both  the  constitutionality  and  the  expediency  of  the  law  cre- 
ating this  bank  are  well  questioned  by  a  large  portion  of  our 
fellow-citizens  and  it  must  be  admitted  by  all,  that  it  has  failed 
in  the  great  end  of  establishing  a  uniform  and  sound  currency. 

"  Under  these  circumstances,  if  such  an  institution  is  deemed 
essential  to  the  fiscal  operations  of  the  government,  I  submit  to 
the  wisdom  of  the  legislature  whether  a  national  one,  founded 
upon  the  credit  of  the  government  and  its  revenues,  might  not 
be  devised  which  would  avoid  all  constitutional  difficulties,  and 
at  the  same  time  secure  all  the  advantages  to  the  government 
and  country  that  were  expected  to  result  from  the  present 
bank."1 

South  Carolina's  legislature  immediately  took  up  the  South 
suggestion  of  a  national  bank,2  looking  upon  it  as  in  plan 
line  with  its  own  state  bank  policy,  and  estimating  the 
demand  of  the  country  for  currency  (and  banking  capi- 
tal) at  $  1, 000, 000,000  it  recommended  that  the  United 
States  issue  that  amount  of  currency  pledging  its  faith 
to  its  redemption,  apportion  it  as  banking  capital  to  the 
several  states  to  be  used  by  them  or  farmed  out  to  cor- 
porations, the  states  to  guarantee  the  federal  government 
against  any  loss  that  might  result  and  to  pay  1  per  cent 

1  Messages  of  Presidents,  Vol.  II. 

2  Niles  Register,  1830. 


98 


CONTEST  FOR  SOUND  MONEY 


Congress 

opposes 

Jackson. 


McDuffie's 
report. 


for  its  use.  No  official  action  appears  to  have  been 
taken  by  other  states. 

Both  houses  of  Congress  referred  the  subject  to  com- 
mittees. The  report  of  that  of  the  House  (1830)  was 
very  voluminous,1  and  its  chairman  (McDuffie,  S.C.), 
after  a  complete  presentation  of  the  facts,  defended  the 
federal  bank  policy.  He  reviewed  the  question  of  its 
constitutionality  and  utility,  as  well  as  the  expediency 
of  Jackson's  recommendation  of  a  "  national  bank " 
founded  on  the  credit  of  the  government.  Upon  the 
first  point  he  recalled  that  most  of  the  leading  oppo- 
nents, both  in  the  legislative  and  in  the  executive  de- 
partments of  the  government,  taught  by  the  "  very 
brief  but  fatal  experience"  (181 1- 18 16),  yielded  their 
views,  and  the  judicial  department  had  unanimously 
decided  the  question  of  the  constitutionality  of  the 
charter.  He  argued  that  the  power  to  regulate  the 
value  of  money  given  by  the  Constitution  to  Congress 
unquestionably  carried  the  power  to  establish  efficient 
means  to  that  end.  He  forcibly  and  conclusively  con- 
troverted Jackson's  assertion  that  the  bank  had  failed 
to  serve  the  purpose  for  which  it  was  established,  and 
demonstrated  that  the  paper  currency  had  been  made 
uniform  and  sound. 

Jackson's  national  bank  plan  was  fairly  "riddled." 
It  was  the  general  opinion  that  it  would  ultimately 
result  in  merely  a  government  note-issue,  and  the  im- 
possibility of  providing  a  satisfactory  currency  of  this 
character,  subject  as  it  would  be  to  partisan  influences, 
was  conclusively  demonstrated. 

In  the  Senate  the  suggestion  of  Jackson  met  a  similar 
reception.  The  report  (made  by  Smith  of  Maryland) 
maintained  that  a  sound  and  uniform  currency  system 

1  House  Reports,  21st  Congress,  rst  Sess.  Also  in  Clarke  and  Hall, 
History  of  Bank  of  United  States. 


THE  PAPER   CURRENCY  99 

existed,  provided  by  the  Bank  of  the  United  States,  and 
that  there  were  "insuperable  and  fatal"  objections  to 
the  scheme  proposed  by  Jackson,  which  the  committee 
pronounced  impracticable.  Both  houses  were  favorable 
to  the  bank. 

Notwithstanding  this  advice  of  his  friends  in  Congress 
(for  the  committees  were  both  controlled  by  Jacksonians), 
and  notwithstanding  the  opinions  of  all  but  one  member 
of  his  Cabinet,  which  included  Ingham  as  Secretary  of 
the  Treasury,  Jackson  repeated  his  attack  upon  the  bank  Jackson  re- 
in his  message  in  1830  and  in  a  milder  form  in  183 1.  news  attack' 
It  was  well  known  to  the  leaders,  as  Adams  showed 
in  his  report  in  1832,  although  not  fully  understood  by 
the  public  until  later,  that  he  was  secretly  influenced 
by  a  cabal  of  lesser  politicians,  generally  known  as 
the  "  Kitchen  Cabinet "  (with  Amos  Kendall,  after- 
ward Postmaster-general,  at  its  head),1  whose  motives 
were  anything  but  patriotic.  They  used  Secretary 
Ingham  to  open  an  attack  upon  the  management  of 
the  bank's  branch  in  New  Hampshire  upon  allegations 
which  proved  entirely  unfounded.  The  cabal  ultimately 
forced  Ingham,  who  believed  in  the  bank,  out  of  the 
Cabinet.2 

The  question  of  rechartering  soon  became  one  on 
which  the  political  parties  divided.  Clay,  then  the 
Whig  candidate  for  the  presidency,  espoused  the  cause 
of  the  bank,  and  upon  the  advice  of  the  leaders  of  that 
party,  Biddle  early  in  1832  petitioned  Congress  for  a  Petition  for 
renewal  of  the  charter.  Jackson  and  his  partisans  re- 
garded this  as  a  challenge  to  battle,  and  Benton  assumed 
the  leadership  of  the  opposition.3     In  the  House,  Polk, 

1  Sumner,  History  of  Banking  in  United  States  ;   Horace  White,  Money 
and  Banking,  pp.  288-291  ;   Niles  Register  ;   Duane's  Narrative. 

2  Niles  Register. 

8  Benton,  Thirty  Years'  View,  Vol.  I.,  p.  236. 


IOO  CONTEST  FOR  SOUND  MONEY 

afterwards  President,  was  the  anti-bank  leader.  Ben- 
ton was  in  fact  opposed  to  all  bank  currency,  entertain- 
ing the  opinion,  which  he  aired  upon  every  possible 
occasion,  that  the  country  would  be  more  prosperous 
with  a  circulation  composed  of  coin  only. 
Committee  in  March,  under  the  influence  of  Benton,  a  committee 

the  bank.CS  °f  tne  House  of  Representatives  was  appointed  to  ex- 
amine the  bank.  The  report1  was  in  three  parts,  one 
adverse  to  the  bank  by  the  majority  (including  Clayton 
of  Georgia,  the  chairman ),  the  second  favorable  to  the 
bank,  by  McDuffie,  and  the  third  by  John  Quincy 
Adams,  also  favorable,  and  giving  special  prominence  to 
certain  features.  In  many  particulars  the  Clayton 
attack  (openly  fathered  by  Benton)  was  frivolous. 
Usury,  the  issue  of  "  branch  drafts  "  already  referred  to, 
selling  foreign  coin,  domestic  exchange  and  stocks,  non- 
user  of  charter  by  refusing  to  issue  notes  at  certain 
branches,  making  donations  for  roads  and  canals,  build- 
ing and  renting  houses,  were  the  principal  criticisms, 
and  were  manifestly  made  in  order  to  create  political 
capital.  Upon  none  of  these  charges  would  serious- 
minded  individuals  have  justified  a  discontinuance  of  the 
bank.  The  criticisms  applied  to  its  administration 
rather  than  the  bank  itself.  One  charge  that  the  bank 
purchased  newspaper  support  by  granting  a  loan  was 
fully  disproved,  one  of  the  members  of  the  majority 
acquitting  the  bank  of  any  such  motives.2  On  the 
other  hand,  it  developed  that  some  members  of  the 
cabal  had  failed  in  their  purpose  to  drag  politics  into 
the  management  of  one  of  the  branches,  for  their  pecuni- 
ary benefit,  which  indicated  the  motive  for  their  secret 
machinations.      This    evidence,    as    well    as    Biddle's 

1  House  Reports,  2  2d  Congress,  1st  Sess. 

2  R.  M.  Johnston,  who,  however,  admitted  that  he  had  not  looked  at 
a  document. 


THE  PAPER   CURRENCY  ioi 

masterly  defence  of  the  bank,  was  suppressed  by  Clay- 
ton but  brought  out  by  Adams.1  The  chief  witness 
against  the  bank  (Whitney)  was  subsequently  proven 
guilty  of  perjury,  nevertheless  he  was  received  into  the 
"Kitchen  Cabinet"2  in  good  fellowship. 

A  bill  for  the  extension  of  the  charter  was  reported,  Recharter 
in  the  Senate  from  a  committee  headed  by  G.  M.  Dallas 
(son  of  the  former  Secretary)  and  Webster,  and  in  the 
House  from  McDuffie's  committee  (Ways  and  Means). 
Dallas  thought  the  time  inopportune,  a  presidential 
campaign  being  at  hand,  but  he  supported  the  measure 
heartily.  The  Senate  bill  passed.  It  provided  for  an 
extension  of  the  charter  for  fifteen  years,  upon  the  pay- 
ment of  an  annual  bonus  of  $200,000.  It  also  contained 
a  provision  (to  which  Dallas  had  objected)  compelling 
the  bank  to  accept  its  own  notes  from  state  banks  no 
matter  where  issued  or  where  tendered.  "  Branch 
drafts  "  were  prohibited,  but  subordinate  officers  were 
permitted  to  sign  notes,  and  Congress  reserved  the  right 
to  prohibit  notes  under  $20.  The  vote  on  the  bill  in  the 
upper  house  was  28  to  20,  in  the  lower  one  107  to  85. 
Jackson  vetoed  the  measure  (July  10,  1832),  and  it  failed 
to  command  the  necessary  two-thirds  to  pass  it  over  the 
veto. 

Jackson's  objections3  were  (1)  that  the  recharter  con-  Jackson's 
tinued  a  practical  monopoly,  (2)  benefited  the  share-  veto' 
holders  by  giving  them  a  valuable  gratuity,  (3)  foreigners 
held  a  large  part  of  the  shares,  and  in  case  of  war  the 
bank  could  be  used  by  the  enemy,  (4)  finally  that  it  was 
unconstitutional.  He  waived  aside  the  argument  that 
the  liquidation  of  so  large  a  concern  would  cause  dis- 
turbances, and  held  that  neither  he  nor  Congress  was 

1  House  Reports,  22cl  Congress,  ist  Sess. 

2  White,  Sound  Currency,  Vol.  IV.,  No.  18. 
*  Messages  of  Presidents,  Vol.  II. 


102  CONTEST  FOR  SOUND  MONEY 

bound  by  the  decision  of  the  Supreme  Court  that  the 
charter  was  constitutional.  Upon  this  last  point  Madi- 
son had  just  previously  published  a  letter  in  which  he 
radically  disagreed  with  Jackson.1 

The  Supreme  Court  had  passed  upon  the  charter  of 
the  bank,  and  held  it  constitutional  ten  years  prior  to 
Jackson's  attack  in  1829.  It  seems  strange  therefore 
that  he  should  make  the  principal  ground  for  vetoing 
the  renewal  bill  the  unconstitutionality  of  the  original 
charter.  His  position  that  his  oath  to  support  the  Con- 
stitution bound  him  to  support  it  as  he  construed  it  and 
not  as  interpreted  by  the  Courts,  was  untenable.  The 
President,  of  all  persons,  is  bound  by  the  Constitution 
Jackson's        and  laws  as  interpreted  by  the  Supreme  Court.     Jack- 

views  consid- 

ered>  son  believed  the  bank  was  being  used  in  opposition  to 

him  politically,  and  the  subsequent  virtual  alliance  be- 
tween the  Whig  party  and  the  bank  would  indicate  that 
his  belief  may  have  been  well  founded.  Be  this  true,  he 
had  wantonly  begun  the  attack  when  he,  as  a  statesman, 
should  have  sought  to  correct  the  management  rather 
than  destroy  the  bank.  It  seems  strange  that  political 
fortune  could  induce  men  to  attack  with  such  vehemence 
an  institution  when  the  inevitable  effect  must  be  to 
jeopardize  the  national  interests  of  the  whole  people. 
Our  fathers  had  many  virtues  which  it  is  well  to  emu- 
late, but  in  respect  to  political  rancor  and  partisan 
vindictiveness  the  present  is  certainly  a  great  improve- 
ment upon  the  period  under  discussion. 

It  should  be  borne  in  mind  that  the  constitutional  ob- 
jection which  confronted  every  attempt  to  exercise  any 
power  not  specially  delegated  to  Congress  was  brought 
forward  by  representatives  of  the  slave  states.  The 
agitation  against  slavery  kept  its  champions  constantly 
on  the  alert   lest   some  precedent   be   established  that 

1  Letters  to  C.  J.  Ingersoll,  Clarke  and  Hall's  History,  p.  778. 


THE  PAPER   CURRENCY  103 

might  tend  to  provoke  national  interference  with  that 
institution.     The  less  the  power  conceded  to  Congress,   Effect  of 

ii  1  1   •        1  state  rights 

and  the  greater  the  power  reposed  in  the  states,  the  less  doctrine, 
likelihood  there  would  be  of  outside  interference  either 
by  law  or  by  failure  to  suppress  efforts  constantly  being 
made  to  aid  slaves  in  escaping.  Vermont  and  Ken- 
tucky were  admitted  as  states  at  the  same  time,  and 
when  Maine  applied  for  admission  she  was  kept  waiting 
pending  the  controversy  over  the  question  of  slavery  in 
Missouri.  Nothing  was  permitted  to  be  done  which 
tended  to  impair  the  relative  power  of  the  slaveholding 
interests.  This  policy  of  minimizing  the  powers  of  the 
general  government  is  largely  responsible  for  the  failure 
to  provide  a  national  currency  free  from  the  evils  which 
seemed  inseparable  from  a  currency  issued  under  the 
heterogenous  laws  of  the  states.  In  criticising  Jackson 
for  overthrowing  the  second  bank  it  should  be  borne  in 
mind  that  the  Whig  party  under  the  leadership  of  Clay 
sought  to  gain  power  by  forcing  the  renewal  of  the 
charter  forward  as  a  political  issue. 

Jackson's  veto  caused  great  excitement,  and  was  used  The  veto  a 
to  aid  him  in  his  campaign  for  reelection  (1832).     The 
friends  of   the   bank  were  equally  active,  and   public 
meetings  were  held  at  which  Jackson  was  denounced 
in  unmeasured  terms. 

Naturally  the  great  majority  of  the  business  men  of 
the  day  ranged  themselves  with  the  bank  party,  which 
gave  Jackson's  partisans  an  additional  weapon,  re- 
enforcing  the  cry  of  "  monopoly  "  and  "  wealth  "  with 
which  they  were  inciting  the  masses  to  believe  that 
their  liberties  were  in  danger.  Unfortunately  for  the 
bank  Biddle  took  an  active  part  in  the  contest,  which 
soon  became  personal,  although  he  insisted  that  he  was 
merely  defending  the  bank  against  the  unwarranted 
attacks  of  the  cabal.     It  thus  gave  some  color  to  the 


political 


104 


CONTEST  FOR  SOUND  MONEY 


Jackson 
reelected. 


Public  de- 
posits in  the 
bank. 


charge  that  this  powerful  institution  was  using  its  un- 
told millions,  including  the  government's  money  on 
deposit  with  it,  to  defeat  the  popular  idol,  the  hero  of 
the  War  of  1812.  In  fact  the  total  sum  used  by  the 
bank  for  "  literature "  during  the  campaign  did  not 
amount  to  $50,000,  *  and  no  evidence  that  it  used  its 
power  in  business  lines  (by  refusing  discounts,  etc.,  as 
was  charged)  was  produced.  Jackson  was  reelected 
by  a  larger  electoral  vote  than  in  1828,  although  the 
popular  vote  was  smaller. 

In  his  message  in  December,  1832,2  Jackson  suggested 
to  Congress  that  the  government  deposits  be  transferred, 
in  whole  or  in  part,  from  the  bank  to  the  state  banks. 
He  said :  — 

"  Such  measures  as  are  within  the  reach  of  the  Secretary  of 
the  Treasury  have  been  taken,  to  enable  him  to  judge  whether 
the  public  deposits  in  that  institution  may  be  regarded  as  en- 
tirely safe ;  but  as  his  limited  power  may  prove  inadequate  to 
this  object,  I  recommend  the  subject  to  the  attention  of  Con- 
gress, under  the  firm  belief  that  it  is  worthy  of  their  serious 
investigation.  An  inquiry  into  the  transactions  of  the  institu- 
tion, embracing  the  branches  as  well  as  the  principal  bank, 
seems  called  for  by  the  credit  which  is  given  throughout  the 
country  to  many  serious  charges  impeaching  the  character,  and 
which  if  true,  may  justly  excite  the  apprehension  that  it  is  no 
longer  a  safe  depository  of  the  money  of  the  people." 

He  also  recommended  the  sale  of  the  government's 
shares  in  the  bank. 

Secretary  McLane  had  stated  in  his  report  in  18313 
that  — 

"  It  must  be  admitted,  however,  that  the  good  management 
of  the  present  bank,  the  accommodation  it  has  given  to  the 

1  Report  of  Government  Directors,  Finance  Reports,  Vol.  III.,  and 
Congressional  Report  of  1832. 

2  Messages  of  Presidents,  Vol.  II. 

8  Finance  Reports,  Vol.  III.,  p.  222. 


THE  PAPER   CURRENCY  105 

government,  and  the  practical  benefits  it  has  rendered  the   McLane  on 
community,  whether  it  may  or  may  not  have  accomplished  all  thebank- 
that  was  expected  from  it,  and  the  advantages  of  its  present 
condition,  are  circumstances  in  its  favor  entitled  to  great  weight, 
and  give  it  strong  claims  upon  the  consideration  of  Congress  in 
any  future  legislation  on  the  subject." 

These  considerations  induced  him  to  recommend  a 
recharter  with  modifications,  at  the  proper  time.  In 
1832  he  directed  a  special  examination  of  the  bank  and 
its  branches,  which  the  "  Kitchen  Cabinet "  expected 
would  prove  it  to  be  insolvent.  To  their  disgust  the 
examiner  reported  that  the  bank  had  upward  of 
$42,000,000  in  excess  of  its  liabilities,  hence  more  than 
$7,000,000  in  excess  of  its  stock  obligation.1  The 
House  of  Representatives  after  an  examination  of  the  Special 
bank  by  the  Committee  on  Ways  and  Means,  by  a  vote  of^ank. 
of  109  to  46,  declared  by  resolution  that  the  public 
funds  were  absolutely  safe  in  the  bank,  and  by  a  vote 
of  102  to  91  opposed  the  sale  of  the  shares.  In  the 
report  by  Verplanck  of  the  committee  it  was  shown 
that  in  sixteen  years  the  transactions  of  the  govern- 
ment had  aggregated  $440,000,000,  and  not  one  dollar 
had  been  lost.  Polk  in  the  minority  report  expressed 
serious  doubts  as  to  the  safety  of  the  public  funds.2 

Immediately  after  the  adjournment  of  Congress,  in 
March,  1833,  Kendall  and  his  associates  began  the  work 
of  utterly  destroying  the  bank.  Soon  after  the  re- 
inauguration  of  Jackson,  plans  were  devised  to  use 
the  provision  of  law  authorizing  the  Secretary  of  the 
Treasury  to  place  the  government  moneys  elsewhere  Removal  of 
(provided  he  explained  his  reason  to  Congress),  as  the  proposed, 
first  measure  in  the  renewed  warfare.  McLane  re- 
fused to  be  a  party  to  this  transaction  and  was  made 

1  Niles  Register. 

2  House  Reports,  22<l  Congress,  2d  Sess.,  No.  121. 


io6 


CONTEST  FOR  SOUND  MONEY 


Duane's 
position. 


Removal  of 
deposits  by 
Taney. 


Secretary  of  State,  W.  J.  Duane  being  appointed  to 
the  Treasury.  State  banks  had  been  negotiated  with 
by  Kendall  to  be  prepared.  Jackson  read  to  his 
cabinet  in  September  a  paper  in  which  the  plan  was 
set  forth.  He  felt  that  in  reelecting  him  the  people 
had  decided  against  a  recharter.  All  the  old  charges 
were  rehearsed.  The  bank  had  opposed  his  reelection 
and  should  be  punished.  A  majority  of  the  cabinet, 
including  McLane,  Duane,  and  Cass,  did  not  favor  the 
step  proposed.  Duane,  who  was  not  favorable  to  the 
bank's  recharter,  particularly  opposed  it  as  unwise, 
arbitrary,  uncalled  for,  a  breach  of  faith,  and  danger- 
ous because  no  other  safe  depository  could  be  found. 
Duane  stated  that  not  only  had  he  refused,  when 
pestered  by  the  "irresponsible  cabal,"  to  change  the 
system,  but  had  been  promised  by  the  President  that 
he  would  be  allowed  to  manage  his  department  with- 
out interference,  particularly  upon  this  point.  Upon 
being  ordered  to  "remove  the  deposits"  by  Jackson, 
Duane  flatly  refused,  declaring  such  action  unconscion- 
able and  opposed  to  the  express  will  of  Congress,  and 
denying  the  power  of  the  President  under  the  law  to 
order  the  Secretary  of  the  Treasury  to  do  so.1  Jackson 
promptly  removed  Duane  and  appointed  in  his  stead 
Taney,  then  Attorney-general  and  afterwards  Chief 
Justice  of  the  Supreme  Court,  who  at  once  signed  the 
order  for  the  removal  of  the  deposits.  Many  of  Jack- 
son's friends  condemned  his  policy  in  this  respect. 

At  first  the  process  adopted  was  not  to  remove  the 
deposits  from  the  bank,  but  to  place  the  revenues  as 
received  in  state  banks,  drawing  on  the  bank  for  all  dis- 
bursements.    Later  deposits  were  actually  transferred. 

Deprived  speedily  of  one-half  of  the  public  money, 
and  its  total  deposits  shrinking  to  nearly  $10,000,000, 

1  Duane's  Narrative. 


THE  PAPER   CURRENCY  \oy 

the  bank  was  necessarily  obliged  to  curtail  its  loans, 
which  caused  a  stringency,  for  which  it  was  again 
attacked.  Actually,  the  curtailment  was  less  than  three- 
quarters  of  the  loss  of  deposits.  Biddle,  knowing  the 
unscrupulousness  of  the  cabal,  conducted  the  business 
most  cautiously.  Kendall  showed  his  real  object  in  a 
published  letter,  in  which  he  said  that  the  bank  only 
continued  to  exist  because  of  Taney's  forbearance,  and 
apparently  gave  it  only  a  forty  days'  lease  of  life.1  No 
measure  was  too  contemptible  for  Kendall  to  employ. 
The  invariable  custom  of  advising  the  bank  of  Treasury 
drafts  was  at  his  instigation  abrogated  and  secret  drafts 
for  over  two  and  a  quarter  millions  were  issued,  trans- 
ferring deposits  to  pet  state  banks,  with  the  hardly 
disguised  purpose  of  causing  a  "run."2 

When  Congress  met  in  December  the  President  and  Congress 
Secretary  Taney  reported  upon  the  subject.3  The  dlsa£rees- 
Senate,  then  anti-Jackson,  refused  to  confirm  Taney's 
nomination  made  during  recess.  In  the  House  the 
Jacksonians  controlled  and  voted  132  to  82  that  the 
bank  ought  not  to  be  rechartered,  and  118  to  103  that 
the  deposits  should  not  be  returned  to  the  bank.4  Levi 
Woodbury  became  Taney's  successor  in  the  Treasury. 

In  the  Senate  Clay  had  a  resolution  passed  (23  to  18) 
calling  upon  the  President  to  say  if  the  published  paper 
purporting  to  be  the  one  read  to  the  cabinet  in  Septem- 
ber was  genuine,  and  asking  that  the  Senate  be  furnished 
with  a  copy.5  Jackson  declined,  standing  upon  his  con- 
stitutional rights.  Thereupon  the  Senate  passed  a  reso-  Jackson  cen- 
lution  declaring  that  in  his  action  relating  to  the  public 
revenues  the  President  had  exceeded  his  powers,  and 

1  White,  Money  and  Banking.  2  Niles  Register. 

8  Finance  Reports,  Vol.  III.     Special  Report  on  Removal. 
*  Williams,  Statesman's  Manual,  Vol.  II. 
6  Benton,  Thirty  Years'  View. 


108  CONTEST  FOR  SOUND  MONEY 

another,  supported  by  Webster,  which  pronounced  the 
reasons  given  by  Secretary  Taney  for  removing  the 
deposits  "unsatisfactory  and  insufficient."1  Jackson 
sent  in  a  message  protesting  against  the  first  resolution. 
After  long  discussion  the  Senate  by  a  vote  of  27  to  16 
refused  to  receive  the  message,  regarding  it  as  a  breach 
of  its  privileges  on  the  part  of  the  President  and  deny- 
ing his  right  to  protest  to  the  Senate  against  any  of  its 
proceedings.2 
Another  con-  The  House  of  Representatives  again  ordered  an  ex- 
examination,  animation  of  the  bank,  to  which  it  did  not,  in  the  opinion 
of  the  majority  of  the  committee  (Jacksonian),  submit 
gracefully.  The  minority,  headed  by  Edward  Everett, 
contended  that  the  bank  had  shown  every  disposition 
to  aid  the  examination  of  the  affairs  relating  to  the  ques- 
tion of  violation  of  the  charter,  which  was  the  limit  of 
the  power  of  the  committee  and  which  the  majority 
had  endeavored  to  transcend.3  The  Senate  also  ordered 
an  examination  which  was  reported  by  Tyler  (afterward 
President)  and  was  favorable  to  the  bank.4  No  specific 
action  was  taken,  but  the  President  felt  called  upon  to 
send  a  special  message  to  Congress  criticising  the  bank's 
action  at  that  time.5  In  the  Senate  Jackson's  nominees 
for  government  directors  of  the  bank  were  not  con- 
firmed;  the  vote  stood  30  to  11.  In  December,  1834, 
in  his  annual  message  to  Congress,6  the  bank  is  char- 
jackson's       acterized   as    "  the    scourge   of   the   people."      All   his 

further    criti-    r  ,  ,      <  1     ,  ,     , 

former  charges  were  repeated,  and  he  recommended 
the  sale  of  the  government  holdings  of  stock  and  the 
repeal  of  that  part  of  the  charter  making  the  bank's 
notes  receivable  for  public  dues.  He  averred  that 
events  had  proved  that  the  bank  was  unnecessary,  that 

1  Statesman's  Manual.  2  Ibid.  3  Ibid. 

4  Senate,  Doc.  1 7,  23d  Congress,  2d  Sess. 

5  Messages  of  Presidents,  Vol.  III.  6  Ibid. 


cism. 


THE  PAPER    CURRENCY  109 

the  state  banks  had  been  found  fully  adequate  to  serve 
the  government,  and  would  soon  be  in  position  to  supply 
all  the  wants  of  the  people,  and  that  if  the  states  re- 
formed their  systems,  prohibiting  small  notes,  the  coun- 
try would  in  a  few  years  have  as  sound  a  currency  as 
any. 

In  the  interval  the  bank  had  obtained  a  charter  from  The  bank  is 
the  state  of  Pennsylvania  and  continued  business  under  pennsyi- 
it  after  March,  1836,  when  its  federal  charter  expired.   vania- 
The   government   continued   to    hold  the    shares  until 
liquidation. 

In  December,  1836,1  Jackson's  last  message  com- 
plained that  the  bank  had  not  yet  settled  its  affairs 
and  was  doing  a  number  of  things  which  he  disap- 
proved. 

He  again  referred  to  the  state  banks,  representing 
that  their  services  to  the  government  were  far  greater 
than  those  rendered  formerly  by  the  bank.  But  he  also 
showed  that  little  progress  had  been  made  in  retiring 
small  notes,  and  that  the  state  banks  had  entered  into 
speculation  in  public  lands  and  resorted  to  inflation  in 
order  to  do  so. 

In  his  "  farewell  address  "  (March,  1837),2  he  launched  Jackson  on 
his  final  bolt  against  the  bank,  including  the  entire  paper  interests." 
currency  system,  banks  generally,  the  "  moneyed  inter- 
ests "   and    their    encroachment,    as   dangerous   to   the 
liberties  of  the  people. 

Woodbury's  report  for  1836  was  a  confession  that  the 
state  banks  were  using  the  public  deposits  both  specula- 
tively and  to  increase  their  note-issues,  which  had  been 
expanded  fully  50  per  cent  since  1833 ;  nevertheless  the 
public  moneys  were  regarded  safe. 

With  the  destruction  of  the  bank  perished  by  far  the 
best  instrumentality  for  furnishing  the  people  of  the 

1  Messages  of  Presidents,  Vol.  III.  2  Ibid. 


IIO  CONTEST  FOR  SOUND  MONEY 

Review  of  the  United  States  a  sound  paper  currency  that  could  be 

bank  ques-  ,  .  ... 

tion.  devised  under  the  circumstances  and  conditions  then 

prevailing.  It  merited  and  received  the  commendation 
of  a  host  of  the  ablest  men  of  the  country,  who  in  other 
particulars  differed  radically  from  the  political  views  of 
Hamilton,  who  may  be  fairly  called  the  designer  of  the 
second  as  well  as  of  the  first  United  States  Bank.  That 
its  destruction  was  planned,  and  not  regulation  or  reforma- 
tion of  the  defects  which  experience  brought  to  light,  is 
clearly  shown  by  the  evidence.  The  men  behind  the 
scenes  endeavored  to  use  the  bank  for  their  own  ends, 
and  failing,  resolved  to  destroy  it,  and  circumstances  so 
shaped  events  that  Clay,  the  inveterate  opponent  of 
Jackson,  became  its  champion,  thus  involving  it  in  the 
maelstrom  of  politics  against  its  will. 

The  bank  and  its  management  were  not  perfect,  but 
every  defect  which  had  manifested  itself  could  have 
been  easily  remedied,  and  indeed  most  of  them  were 
provided  for  in  the  recharter  bill. 

Webster,  in  discussing  another  subject,  after  stating 
that  the  question  of  recharter  was  settled  not  to  be  re- 
opened until  the  people  called  for  it,  expressed  his  judg- 
ment on  the  bank  in  the  following  words  i1 — 

Webster's  "  The  bank  has  been  assailed  by  party,  mainly,  as  I  believe, 

V1GVh  h  k  because  it  would  not  yield  itself  to  party  objects.  No  cry  was 
raised  against  its  constitutionality,  no  doubt  expressed  on  that 
point,  till  its  directors  had  resisted  suggestions,  the  effect  of 
which  would  have  been  to  render  the  bank  a  servile  instrument 
in  the  hands  of  political  men.  In  my  judgment,  those  directors 
were  entirely  right,  and  the  country,  I  think,  should  rejoice  that 
they  staked  and  risked  the  continuance  of  the  charter  on  that 
point.  They  could  easily  have  secured  the  renewal  of  their 
charter.  A  little  compliance  would  have  done  the  whole  busi- 
ness.   They  were  courted  before  they  were  denounced.     If,  in 

1  Webster's  Works. 


THE  PAPER   CURRENCY  m 

1829  and  1830,  they  would  have  consented  to  make  a  partner- 
ship with  the  Treasury,  and  to  yield  themselves  to  power,  they 
would  have  been  commended,  extolled  in  many  a  message  and 
report,  and  enabled  to  take  their  own  time  for  a  renewal.  The 
bank  has  fallen  in  its  independence,  and  by  reason  of  its  inde- 
pendence. It  should  be  proud  so  to  have  fallen;  and  it  is 
much  better  for  the  country  that  it  should  thus  fall,  than  that  it 
should  purchase  a  prolonged  existence  by  rendering  itself  a  tool 
of  party  power. 

"  It  is  well  known  to  be  my  opinion  that  direct  injustice  was  Bank  un- 
done to  the  bank  in  the  withdrawal  of  the  deposits  j  and  injus-  Justly treated- 
tice  has  been  done  to  it  also,  as  I  think,  by  the  gross  and  un- 
founded imputations  made  upon  its  general  management.  The 
bank  now,  for  many  years,  has  accomplished  every  object 
intended  by  its  establishment.  It  has  reformed  the  currency, 
sustained  it  when  reformed,  and  upheld  a  system  of  internal 
exchange,  safe,  cheap  and  of  unprecedented  and  unparalleled 
facility.  No  country  has  seen  the  like  ;  nor  shall  we  see  it  soon 
again  when  the  operations  of  the  bank  shall  cease.  The  direc- 
tors, of  late  years  especially,  have  had  a  most  difficult  and  un- 
desirable duty  to  perform ;  but  they  have  performed  it,  as  I 
think,  with  entire  uprightness  and  great  ability.  Every  fair 
investigation  has  proved  this,  and  the  state  of  the  bank  itself, 
the  best  of  all  proofs,  abundantly  shows  it.  The  time  will 
come,  I  am  sure,  when  justice  will  be  done  them,  universally, 
as  it  is  done  them  now  by  those  who  have  sought  for  informa- 
tion, and  have  formed  their  judgments  with  candor  and  good 
sense." 

Ingham  in  1832  (after  his  retirement  from  the  Treas- 
ury) said : 1  — 

"  The  bank  has  purified  one  of  the  worst  currencies  that  ever  Ingham's 
infested  any  country  or  people.     It  consisted  of  mere  paper,  of  *ievys  on  the 
no  definite  value,  accompanied  by  worthless  tickets  issued  from 
broken  banks,  petty  incorporations  and  partnerships,  in  almost 
every  village.     Instead  of  this,  the  United  States  Bank  has  given 
us   the   best  currency   known  among  nations.     It  supplies  a 

1  Niles  Register. 


112 


CONTEST  FOR  SOUND  MONEY 


medium  equal  in  value  to  gold  and  silver,  in  every  part  of  the 
union.  It  preserves  with  a  steady  and  unerring  power  a  uniform 
and  equal  value  in  the  paper  of  the  local  banks ;  gives  stability 
and  certainty  to  the  value  of  all  property,  and  to  the  incalculable 
benefits  of  internal  commerce  ;  it  maintains  domestic  exchanges, 
at  a  less  premium  than  it  would  cost  to  transport  specie ;  and 
enables  the  government  to  transmit  its  funds  from  one  extremity 
of  the  union  to  another,  without  cost,  without  risk,  without  press- 
ure upon  the  section  from  which  they  are  withdrawn,  and  with 
a  despatch  which  is  more  like  magic  than  reality." 


Salutary 
influence  of 
the  bank. 


State  bank 
inflation. 


The  political  rancor  and  sordid  motives  which  en- 
tered into  this  controversy  over  the  renewal  of  the 
charter  are  in  sad  contrast  to  the  exalted  patriotism 
and  statesmanlike  qualities  we  usually  ascribe  to  the 
"fathers." 

When  it  is  borne  in  mind  that  the  means  of  communi- 
cation with  the  remote  parts  of  the  country  were  exceed- 
ingly primitive  (no  railways  existed),  the  undisputed  fact 
that  the  bank  raised  the  credit  of  the  bank  circulation 
throughout  the  Union,  made  transfers  at  little  or  no  cost, 
and  reduced  the  cost  of  exchange  to  a  minimum,  prove 
its  great  value  to  the  country.  McDuffie  states  that  in 
1830  only  the  banks  in  North  Carolina  were  not  specie- 
paying. 

Altogether  it  was  a  reactionary  victory  over  the  intel- 
ligence of  the  day,  and  the  people  paid  roundly  for  it. 
Practically  all  those  who  by  reason  of  their  study  and 
experience  had  actual  knowledge  upon  the  subject 
opposed  the  destruction  of  the  bank  as  a  positive 
evil  which  would  result  in  an  unsound  currency,  just 
as  they  opposed  the  violent  alteration  of  the  ratio  of 
coinage. 

As  was  generally  foreseen,  the  removal  of  deposits 
caused  the  organization  of  a  large  number  of  state  banks. 
The  revenues  were  about  to  accumulate  in  the  Treasury, 


THE  PAPER   CURRENCY  113 

the  public  debt  having  been  entirely  paid,  and  holding 
public  moneys  by  political  favor  became  an  important 
feature  in  banking.  The  number  of  banks  increased 
from  1830  to  the  end  of  1836,  from  330  to  788 1  and 
the  note-issues  from  under  $49,000,000  to  $149,000,000. 
Thus  the  circulation  of  the  country  which  in  1829  was 
about  $7  per  capita  and  then  regarded  by  Gallatin  as 
"sound,"  was  increased  to  $15  per  capita,  an  amount 
equalled  only  in  the  days  of  continental  currency.2  The 
government  had  in  59  state  banks  nearly  $50,000,000, 
before  any  law  regulating  the  deposits  became  effective. 
Speculation  in  public  lands,  in  payment  for  which  the 
government  accepted  almost  any  form  of  paper,  assumed 
tremendous  proportions.  Congress  was  asked  to  stop  Jackson's  at- 
the  speculation  by  restricting  the  funds  receivable  to  inflation.0" 
specie,  but  the  counter-influence  was  too  great  and  the 
defective  measure  passed  for  that  purpose  did  not 
receive  Jackson's  approval.  Congress  had  adjourned 
and  Jackson  undertook  by  means  of  a  Treasury  circular 
to  require  specie  for  land  purchases.  This  caused  a 
violent  collapse  of  the  speculation  and  serious  troubles 
generally,  notably  in  the  West. 

The  act  of  June  23,  1836,3  regulating  deposits,  directed  Deposit  act 
the  Secretary  of  the  Treasury  to  select  in  each  state 
banks  which  in  his  judgment  were  in  a  satisfactory  con- 
dition, in  which  to  deposit  the  revenues  subject  to  the 
Treasury  drafts.  The  limit  of  deposit  was  75  per  cent 
of  paid-up  capital,  the  banks  were  required  to  report 
their  condition  periodically  to  the  Secretary,  to  credit 
all  deposits  as  specie  and  pay  specie  on  demand  for 
Treasury  drafts,  to  make  transfers  and  perform  such 
other  functions  as  the  Bank  of  the  United  States  was 
required  to  by  its  charter.     The  Secretary  might  also 

1  Report  on  Banks,  1863.  2  See  table  at  end  of  chapter. 

8  See  Appendix. 


of  1836. 


1 14  CONTEST  FOR  SOUND  MONEY 

require  further  security  from  the  banks  if  in  his  judgment 
it  was  requisite.  He  was  required  to  report  his  selections 
or  changes  in  depositories  to  Congress,  to  discontinue 
depositories  that  suspended  specie  payments,  or  issued 
notes  under  five  dollars,  and  to  receive  for  public  dues 
no  notes  of  banks  issuing  denominations  under  five  dol- 
lars. He  was  given  power  to  require  depository  banks 
to  have  a  reasonable  amount  of  specie  on  hand.  For 
deposits  in  excess  of  one-fourth  of  the  capital  banks  were 
to  pay  interest  at  2  per  cent  per  annum,  and  the  banks 
were  subject  to  examination.  Transfers  of  deposits,  ex- 
cepting on  account  of  public  business,  were  especially 
prohibited.  This  was  due  to  the  alleged  practice  of 
making  transfers  to  accommodate  certain  banks. 

This  law  Jackson  deemed  onerous  upon  the  banks. 
Distribution  The  same  act  provided  that  the  surplus  in  the  Treasury 
>  surp  us.  jn  excess  0£  $1^000,000  for  a  working  balance  be  deposited 
with  the  states,  in  proportion  to  their  representation  in 
Congress,  in  four  equal  instalments,  beginning  January  1, 
1837,  provided  the  states  authorized  their  treasurers  to 
receive  the  money  and  pledge  its  return  on  demand 
of  the  Secretary  of  the  Treasury.  Although  the  act 
specifically  provided  that  the  funds  were  to  be  held  as 
"  deposits,"  the  general  opinion  was  that  they  were  given 
to  the  states.  This  measure  was  finally  passed  after 
years  of  discussion  on  the  subject  and  after  a  bill  to 
donate  the  money  to  the  states  had  been  vetoed  as  un- 
constitutional. The  amount  finally  transferred  was 
$28,101,644. 

The  prospect  of  the  transfer  of  such  a  large  sum 
from  the  depository  banks  to  the  states  served  to  add  to 
the  general  tendency  to  expansion,  and  the  usual  results 
followed. 

This  deposit  act  of  1836  was  designed  to  accomplish 
several  improvements  in  the  currency  which  under  other 


THE  PAPER   CURRENCY 


115 


conditions  would  probably  have  been  realized.  It  brought  DeP°sit  act 
a  considerable  number  of  banks  throughout  the  country  measure, 
under  the  supervision  of  the  Treasury  Department,  and 
the  importance  given  these  institutions  in  their  localities 
by  being  depositories,  so  regulated,  could  not  have  failed 
to  exercise  an  influence  upon  others.  It  also  contem- 
plated in  an  indirect  manner  the  ultimate  elimination 
of  small  notes,  instead  of  going  directly  at  this  evil  by 
taxing  them  out  of  existence  as  Gallatin  had  proposed. 
It  further  undertook  to  compel  maintenance  of  specie 
payments  by  making  it  profitable.  But  the  act  came  too 
late  :  Jackson  and  Woodbury  had  repeatedly  asked  for 
it  in  vain,  and  when  it  came,  the  provision  for  distribution 
of  the  surplus  and  Jackson's  specie  circular  deprived 
the  country  of  whatever  good  results  might  have  been 
expected  from  it. 

The  following  data  of  the  depository  banks  at  about 
this  period  are  of  special  interest.1 


Capital  .  .  . 
Circulation  .  . 
Public  deposits  . 
Other  deposits  . 
Due  banks  .  . 
Other  liabilities 
Total     .     . 


Loans  and  discounts  . 

Specie 

Notes  of  other  banks  . 
Due  from  other  banks 
Other  resources      .     . 


In  Millions 


Condition  of 

depository 

banks. 


36  Banks 
April  1,  1836 


43-7 
28.8 
36.8 
!5-5 
154 
12.6 


152.8 

101.6 
10.9 
11. 1 
»5-9 
»3-3 


36  Banks 
June  1,  1836 


46.4 
28.O 
4I.0 
16.O 
17.I 

13-8 


162.3 

108.5 
10.5 
1 1.0 

17.9 
14.4 


59  Banks 
Nov.  1,  1836 


77.6 
41-5 

494 
26.6 
24.I 
24.6 


243.8 
164.O 

J5-5 
16.4 
26.6 
21.3 


1  Finance  Reports,  Vol.  III. 


u6 


CONTEST  FOR  SOUND  MONEY 


The  govern- 
ment and  the 
Bank  of  the 
United 
States. 


Considering  the  circulation  alone  the  specie  fund  was 
fairly  satisfactory,  but  when  public  deposits  are  included 
the  reserve  was  rather  slender. 

For  the  purpose  of  winding  up  the  business  of  the 
government  with  the  Bank  of  the  United  States,  several 
acts  were  passed:  April  n,  1836,  to  discontinue  the 
functions  of  the  bank  in  connection  with  government 
loans  ;  June  15,  1836,  repealing  the  section  of  the  charter 
which  made  the  notes  of  the  bank  receivable  for  public 
dues ;  June  23,  1836,  appointing  the  Secretary  of  the 
Treasury  agent  to  settle  for  the  government's  shares  in 
the  bank. 

The  United  States  derived  a  profit  of  over  $6,000,000 
on  its  investment.1  It  will  be  recalled  that  its  subscrip- 
tion was  paid  for  with  5  per  cent  obligations.  They 
amounted  to 


Principal $  7,000,000.00 

Interest 4,950,000.00          $11,950,000.00 

The  bank  paid  in  settlement  for  the 

same 9,424,750.78 

The  dividends  paid  amounted  to     .  7,118,416.29             16,543,167.07 

Profit 4,593.'67-°7 

Bonus   paid    by  the   bank   for  the 

charter 1,500,000.00 

Making  a  total  of $6,093,167.07 


Liquidation 
of  the  bank. 


Although  both  Jackson  and  Benton  charged  that  the 
bank  was  not  getting  ready  to  wind  up  its  affairs,  the 
fact  is  that  prior  to  the  determination  to  continue  under 
a  state  charter,  the  bank  took  definite  steps  toward 
preparation  for  liquidation,  disposing  of  its  branches 
and  converting  its  resources  into  short  paper  and  increas- 
ing its  cash,  as  the  following  table  shows  :2  — 


1  Finance  Report,  1876,  p.  127. 


2  Niles  Register. 


THE  PAPER   CURRENCY 


117 


Items  reported  as  of  April  i,  Each  Year,  in  Millions 


1831 

1832 

1833 

1834 

183s 

58.5 

69.9 

64.8 

54.8 

60.1 

Bills  of  exchange      .     .     . 

14.7 

21.5 

22.7 

18.7 

22.9 

18.2 

21.4 

18.0 

»7-5 

20.5 

12.5 

7.0 

9.0 

10.2 

16.4 

The   public   deposits  at  the  last-mentioned  date  were 
about  1.5  millions. 

The  statistics  of  the  banks  of  Massachusetts,  the  only 
state  that  furnished  continuous  returns  from  an  early 
date  (1803),  afford  an  indication  of  the  results  which 
would  have  been  possible  in  the  whole  country  had  any- 
thing like  sound  principles  prevailed.  The  number  of 
banks,  their  capital  and  circulation,  grew  almost  nor- 
mally and  steadily  during  the  entire  period  from  1803 
to  1836.  There  was  no  great  expansion  when  the  first 
Bank  of  the  United  States  expired,  no  suspension  in 
1 8 14,  hence  no  contraction  necessary  in  18 19.  During 
the  existence  of  the  second  bank,  the  banks  increased 
gradually  and  steadily.  This  was  not  accomplished 
without  many  sad  experiences,  but  the  people  profited 
by  these  and  remedied  the  evils  in  order  to  avert  the 
greater  ones  which  afflicted  others.  From  1784  to  1836 
only  ten  banks  suspended  or  discontinued  business ;  the 
total  losses  to  the  shareholders  and  to  the  public  were 
estimated  at  $300,000.  *  Gallatin's  list  of  banks  that 
failed  between  181 1  and  1830  includes  only  6  of 
Massachusetts,  but  16  of  Pennsylvania  and  18  of 
Kentucky.2 

1  Knox,  Finance  Report,  1876,  p.  132. 

2  Gallatin,  Currency  and  Banking  System. 


Massachu- 
setts banks. 


n8 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 

(Amounts  in  millions  of  dollars) 

Bank  Statistics,  1812  to  1837 

State  Banks 

Estimates  prior  to  1834 


Year 

Number 

Capital 

Deposits 

Circula- 
tion 

Specie 

Loans 

1813      .... 

— 

65.O 

— 

62-70 

28.O 

117 

1814 

— 

80.4 

— 

— 

— 

— 

1815 

208 

88.1 

— 

90-110 

16.5 

x5° 

1816 

246 

89.4 

— 

I IO 

19.0 

— 

1817 

— 

125-7 

— 

— 

— 

— 

1819 

— 

125.0 

— 

45-53 

21-5 

157 

1820 

307 

102. 1 

31.2 

40.6 

16.7 

— 

1829 

329 

IIO.I 

40.8 

48.3 

14.9 

— 

1830 

330 

IIO.O 

39-o 

48.4 

13-5 

160 

No  data  available  for  1812,  1818,  and  from  1821  to  1829.  Figures 
given  for  1820  and  1829  are  Gallatin's;  those  prior  to  1820,  Crawford's;  for 
1830  the  statement  is  composite,  and  probably  erroneous.  All  are  to  a 
great  extent  based  upon  actual  figures,  supplemented  by  estimates. 


Official  Reports  after  1834 


January  i 

Number 

Capital 

Deposits 

Circula- 
tion 

Specie 

Loans 

1834  ...     . 

1835  .... 

1836  .... 

506 
704 
713 

200 
231 
252 

76 
83 

"5 

95 
104 
140 

26 

44 
40 

324 

365 
457 

No  returns  in  1834  from  Del.,  N.J.,  S.C.,  Ga.,  Fla.,  La.,  Ark.,  Ky.,  Ohio, 
Ind.,  111.,  Mich.,  Mo. 

No  returns  in  1835  from  Del.,  Md.,  N.C.,  Ark. 

No  returns  in  1836  from  N.J.,  R.I.,  Ark. 

No  returns  in  1837  fr°m  Ark. 

Incomplete  returns  in  1835  from  S.C.  and  Ohio. 


THE  PAPER   CURRENCY 


119 


Massachusetts  Banks 
1803  to  1837 


Year 

Num- 
ber 

Capital 

Deposits 

Loans 

Circula- 
tion 

Specie 

Notes  of 
Other 
Banks 

1803       .     . 

7 

2.2 

i-5 

3-9 

1.6 

I.I 

0.4 

1808 

16 

6.0 

2.5 

74 

1.0 

1.0 

°-5 

l8ll 

'5 

6.7 

34 

10.1 

24 

1-5 

0.3 

1815 

25 

1 1.5 

4.1 

13-7 

2.7 

3-5 

0.4 

1817 

26 

9-3 

3-5 

12.6 

2-5 

1.6 

0.7 

1820 

28 

10.6 

3-2 

'3-5 

2.6 

i-3 

0.9 

1825 

41 

H-S 

2.7 

22.0 

4.1 

1.0 

0.7 

1830 

63 

19-3 

3-6 

28.0 

5-1 

1-3 

1.4 

1835 

105 

30-4 

12.9 

48.3 

9.4 

1.1 

2.1 

Bank  of  the  United  States1 


Beginning 
of 

Deposits 

Loans 

Bonds, 
etc. 

Circula- 
tion 

Specie 

State 
Bank 
Notes 

Due 

FROM 

Banks 

Due  to 
Banks 

1817    .      . 

1 1.2 

3-5 

4.8 

1.9 

i-7 

0.6 

8.8 



1818   .      . 

I2.3 

41.2 

9-5 

8-3 

2-5 

1.8 

2.2 

1.4 

1819    .     . 

S-8 

35-8 

74 

6.6 

2-7 

1.9 

3-2 

1.4 

1820   .     . 

6.6 

3i-4 

7.2 

3-6 

34 

1.4 

3-o 

2.1 

1821    .     . 

7-9 

30.9 

9.2 

4.6 

7.6 

0.7 

i-3 

2.1 

1822   .     . 

8.1 

28.1 

13-3 

S.6 

4.8 

0.9 

2.8 

2.0 

1823   .      . 

7.6 

30.7 

11.0 

44 

44 

0.8 

1.4 

i-3 

1824   .     . 

13-7 

33-4 

10.9 

4.6 

5.8 

0.7 

2.7 

1.0 

1825    .     . 

12.0 

31-8 

18.4 

6.1 

6.7 

1.1 

2.2 

2.4 

1826   .     . 

11. 2 

334 

18.3 

95 

4.0 

i.l 

1.2 

0.3 

1827    .     . 

14-3 

30.9 

17.8 

8-5 

°-5 

1.1 

2.1 

0.3 

1828   .     . 

14-5 

33-7 

17.6 

9-9 

6.2 

1.4 

0.4 

3-2 

1829   .     . 

17.1 

39-2 

16.1 

1 1.9 

6.1 

i-3 

2.2 

1.4 

1830   .     . 

16.0 

40.7 

11.6 

12.9 

7.6 

*-5 

2.7 

— 

1831    .     . 

•7-3 

44.0 

8.7 

16.3 

10.8 

i-5 

2.4 

0.7 

1832    .     . 

22.8 

66.3 

— 

21.4 

7.0 

2.2 

4.0 

2.0 

1833   •     • 

20.3 

61.7 

— 

'7-5 

9.0 

2.3 

6.8 

2.1 

1834   •     • 

10.8 

54-9 

— 

19.2 

1 0.0 

2.0 

4-9 

i-5 

1835    •     • 

11.8 

5«-8 

— 

»7-3 

'5-7 

i-5 

6.5 

3-i 

1836   .     . 

5-i 

59-2 

23.1 

8.4 

'•7 

4.1 

2.7 

Note.  —  The  government  deposits  have  never  reached  $10,000,000,  and 
were,  in  the  earlier  period,  never  more  than  $6,000,000.     After  1827  the 

1  Finance  Report,  1876,  p.  193. 


120 


CONTEST  FOR  SOUND  MONEY 


discounts  included  important  amounts  of  domestic  bills  of  exchange;  in  the 
last  four  years  this  item  constituted  from  25  to  40  per  cent  of  the  total. 
The  item  "due  to  banks"  prior  to  1828  was  composed  entirely  of  Euro- 
pean credits,  and  that  "  due  from  banks  "  included  large  sums  abroad  in 
many  of  the  years.     Circulation  is  net,  and  includes  "branch  drafts." 

Circulation  of  the  Country 


Bank  Notes 

Year 

Specie 

Treasury 
Notes 

Total 

Popula- 
tion 

Per 

Capita 

State 

U.S. 

1813 

3° 

62 



9 

IOI 

7-9 

#12.78 

1814 

28 

70 



11 

I09 

8.2 

I3-30 

1815 

25 

75 



24 

I24 

8-5 

14.58 

1816 

23 

68 



18 

IO9 

8.7 

12.53 

1817 

22 

75 

1-9 

5* 

IO4 

8.9 

11.68 

1818 

20 

60 

8-3 

1 

89 

9.1 

9.78 

1819 

20 

45 

6.6 

■ 

72 

9-3 

7-74 

1820 

24 

41 

3-6 



69 

9.6 

7.19 

1821 

23 

40 

4.6 



68 

9.9 

6.87 

1822 

18 

40 

5-6 



64 

10.2 

6.27 

1823 

17 

41 

4.4 



62 

10.5 

5-9o 

1824 

19 

42 

4.6 

— 

66 

10.9 

6.06 

1825 

18 

43 

6.1 



67 

11. 2 

6.00 

1826 

20 

44 

9-5 



74 

"•5 

6.43 

1827 

21 

46 

8-5 



76 

1 1.8 

6.44 

1828 

23 

47 

9.9 



80 

12.2 

6-55 

1829 

26 

48 

11.9 



86 

12.5 

6.88 

1830 

32 

48 

129 



93 

12.8 

7.26 

1831 

32 

61 

16.3 



109 

13.2 

8.26 

1832 

30 

70 

21.3 



121 

13-6 

8.90 

1833 

31 

73 

x7-5 



121 

14.0 

8.64 

1834 

41 

95 

19.2 



J55 

14.4 

10.76 

183s 

51 

104 

17-3 



172 

14.8 

11.62 

1836 

65 

140 

23-7 



229 

15.2 

15.06 

Note.  —  In  this  table  the  specie  is  given  for  1820  and  1830- 1836  as  usu- 
ally accepted,  although  the  movement  abroad,  as  shown  in  the  next  table, 
does  not  warrant  the  conclusions.  It  should  be  borne  in  mind  that  from 
1814  to  1817  specie  was  hoarded,  hence  not  actually  in  use. 

The  notes  of  state  banks  are  based  on  Gallatin's  and  Crawford's  esti- 
mates, the  latter  appearing  to  have  been  excessive,  the  former,  too  con- 
servative. 


THE  PAPER    CURRENCY 


121 


Specie  and  Trade  Movement  and  Exchange 
Net  Import,  +.     Export,  — . 


Year 

Specie 

Merchandise 

Exchange  on  London 

1821 

-  2.4 

—  O.I 

3|  @  I2|  premium 

1822 

-  74 

+  18.5 

8i  @  13 

1823 

-  1.3 

+  4-2 

5   @  ™\ 

1824 

+  1.4 

+  3-2 

1\   @  ni    " 

1825 

-   2.6 

-  °-5 

5  @  io£ 

1826 

+   2.2 

+  5-2 

7|  @  i«i 

1827 

+   O.I 

-  3-o 

10  @  III 

1828 

-   O.8 

+  17-0 

9\  @   " 

1829 

+   2.5 

-  0.3 

8£  @  10 

1830 

+   6.0 

-  8.9 

6  @  9f 

1831 

-  i-7 

+  23.6 

6  @  iof    " 

1832 

4-  0.3 

+  13-6 

7  @  11 

1833 

+  4-5 

+  13-5 

5  @  9 

1834 

+  15-8 

+  6.3 

-  2  @  8 

1835 

+  6.7 

+  21.5 

n\  @  10      " 

1836 

+  9-1 

+  52-2 

7  @  10I 

It  is  quite  evident  from  the  above  table  that  a  considerable  amount  of 
foreign  capital  came  to  the  country  after  1830.  It  was  estimated  that  the 
debt  abroad  probably  exceeded  two  hundred  millions  in  1835.  ^l  tnat 
time  (no  United  States  bonds  being  outstanding),  the  bonds  of  the  states 
of  New  York,  Pennsylvania,  Ohio,  Louisiana,  Mississippi,  Alabama,  Florida, 
and  Indiana  were  quoted  in  London;  also  certain  bank  shares  and  canal 
company  bonds. 


CHAPTER  VI 

1837  TO   1849 

Conditions  Briefly  recapitulated   the  conditions   affecting   the 

currency  early  in  1837  were  as  follows:  the  Bank  of 
the  United  States  had  acted  as  regulator  of  the  circu- 
lation of  state  banks  by  refusing  the  notes  of  doubtful 
concerns  and  requiring  the  redemption  of  others ;  now, 
since  its  federal  charter  had  expired  and  it  was  operat- 
ing under  a  charter  from  the  state  of  Pennsylvania, 
it  necessarily  ceased  to  perform  that  function  and  was 
merely  a  very  largely  capitalized  state  institution.  This 
check  upon  the  state  bank  issues  having  been  removed 
and  the  enticing  prospect  of  obtaining  public  deposits 
being  held  out  by  the  Jackson  administration  resulted, 
as  it  did  in  181 1-1817,  in  a  large  increase  in  the  number 
of  state  banks  and  an  inordinate  inflation  of  both  notes 
and  discounts.  Many  banks  were  conducting  business 
without  a  dollar  of  actual  capital  paid  in,  and  a  majority 
were  subject  to  no  legal  restriction.  The  distribution  to 
the  states  of  the  surplus  in  the  Treasury  caused  a  number 
of  the  states  to  create  "fiscal  banks,"  and  the  others 
selected  state  banks  as  public  depositories  ;  thus  this 
large  sum  was  transferred  from  "  pet  "  federal  to  "  pet  " 
state  depositories.  These  transfers  naturally  necessi- 
tated the  calling  of  loans,  for  the  federal  depositories  had 
loaned  the  funds,  and  a  general  curtailment  of  credits 
ensued,  thereby  involving  domestic  exchange  in  more 
or  less  confusion. 
The  states  The  states  had  undertaken  various  enterprises  to  em- 

surpius.  pl°v  ^e  surplus,  the  first  instalment  of  which  was  paid  in 

January,  1837,  and  an  era  of  unbounded  speculation  set  in. 


THE  PAPER   CURRENCY  1 23 

The  federal  government  under  the  existing  regulation 
(the  "  specie  circular  ")  required  payments  to  it  for  pub- 
lic lands  (a  large  source  of  revenue)  to  be  made  in  specie, 
and  other  taxes  were  to  be  collected  in  the  notes  of  specie- 
paying  banks.  Congress  received  at  this  time,  and 
ignored,  a  petition  from  the  Board  of  Trade  in  New 
York,  which,  foreseeing  trouble,  asked  for  a  reestablish- 
ment  of  a  national  bank  for  the  regulation  of-  the  dis- 
ordered currency  and  exchanges. 

Van  Buren,  who  became  President  in  March,  1837,  con- 
tinued Woodbury  as  Secretary  of  the  Treasury  and 
adhered  to  Jackson's  policy. 

After  the  second  instalment  of  surplus  had  been  paid 
to  the  states  in  April,  the  serious  nature  of  the  financial 
and  commercial  situation  became  very  apparent.  A  pub- 
lic meeting  in  New  York  in  that  month  appointed  a  com- 
mittee of  fifty,  with  Gallatin  at  its  head,  to  appeal  to 
the  administration  to  abandon  a  policy  which  threat- 
ened destruction  of  the  material  interests  of  the  nation. 
Over  two  hundred  and  fifty  failures  had  already  oc- 
curred.1 

In  May  specie  payments  were  suspended  and  the  Suspension 
people  were  compelled  to  take  irredeemable  bank-notes,  payments, 
as  well  as  "  shin-plasters  "  of  all  sorts,  in  order  to  carry 
on  the  necessary  transactions  of  each  day.  On  May  15 
(  Van  Buren  called  Congress  to  "meet  in  special  session 
the  following  September.  Notwithstanding  the  fact  that 
the  depository  banks  had  suspended  and  the  Treasury 
funds  were  running  low  or  becoming  unavailable  by  rea- 
son of  the  inability  of  the  state  depositories  to  make  pay- 
ment when  required,  Woodbury  in  July  paid  the  third 
instalment  of  the  surplus  to  the  states  (over  $9,300,000), 
and  in  so  doing  barely  escaped  defaulting  in  his  own 
payments.2 

1  Sumner,  History  of  Banking.  2  Finance  Reports,  Vol.  III. 


124 


CONTEST  FOR  SOUND  MONEY 


Van  Buren's 
message. 


Subtreas- 
ury  sug- 
gested. 


Treasury 
notes. 


When  Congress  met,  Van  Buren  in  his  message,  a  most 
discursive  document  of  twenty-four  pages,  recounted  the 
events  and  cast  upon  the  banks,  depositories  included, 
the  blame  for  the  deranged  business  conditions.  These 
institutions,  which  but  nine  months  before  had  been 
declared  by  Jackson  to  be  satisfactorily  performing  their 
functions,  and  thereby  demonstrating  that  a  national 
bank  was  unnecessary,  were  now  denounced  as  unfaith- 
ful to  their  trusts.  Regarding  banks  as  a  necessary  evil, 
he  believed  that  the  government  should  entirely  sever  all 
connections  with  them  and  keep  its  own  revenues,  to  be 
collected  only  in  specie,  until  needed  for  disbursements.1 

Secretary  Woodbury  reported  that  funds  in  but  six  out 
of  the  eighty-six  depository  banks  were  available.  Five 
others  had  in  a  measure  been  able  to  meet  the  demands 
of  the  Treasury.  His  nominal  balance  was  $34,000,000, 
but  of  this  $28,101,644  was  on  deposit  with  the  states, 
and  over  $5,000,000  was  in  suspended  banks,  leaving 
him  actually  but  $700,000.  He  had  arranged  to  have 
the  revenues  retained  by  the  collectors  and  receivers 
subject  to  Treasury  drafts,  instead  of  depositing  the  same 
in  banks  as  formerly. 

To  meet  the  pressing  obligations  Congress  did  not 
call  upon  the  states  to  repay  the  deposits  recently  made 
with  them,  but  an  act  of  October  2  postponed  the  pay- 
ment of  the  fourth  instalment  until  January  1,  1839,  at 
which  time  there  proved  to  be  no  surplus  to  divide.  On 
October  12  an  act  was  passed  providing  for  an  issue  of 
$10,000,000  of  one  year  Treasury  notes,  receivable  for 
public  dues  and  bearing  not  to  exceed  6  per  cent  inter- 
est, and  also  an  act  postponing  the  payment  of  customs 
bonds.  On  October  16  Congress  took  away  from  the 
Secretary  of  the  Treasury  the  power  to  recall  the  de- 
posits with  the  states,  reserving  the  right  to  itself. 

1  Messages  of  Presidents,  Vol.  III. 


THE  PAPER   CURRENCY  125 

The  amount  which  had  been  paid  in  the  three  instal- 
ments, as  given  above,  it  may  be  remarked,  remains  "  on 
deposit "  to  this  day,  and  is  carried  on  the  books  of  the 
Treasury  as  "  unavailable."  *  Its  recall  has  on  several 
occasions  been  suggested.  On  the  other  hand,  a  num- 
ber of  the  states  have,  even  in  recent  years,  asked  for 
the  fourth  instalment,  which,  however,  has  never  been 
distributed. 

Van  Buren's  recommendations  for  an  independent  Subtreas- 
treasury  were  formulated  into  a  bill,  reported  by  Silas  defeated. 
Wright  (N.Y.)  in  the  Senate,  where  it  passed  over 
Clay's  vigorous  opposition  by  a  vote  of  26  to  20 ;  in  the 
House,  however,  a  contingent  of  Jacksonians  who  fa- 
vored banks  refused  to  act  with  their  party,  and  the 
measure  was  defeated  107  to  120. 

The  Whigs,  under  the  lead  of  Clay  and  Webster,  in- 
sisted that  a  national  bank  was  the  only  adequate 
remedy  for  the  existing  evils.  The  chief  need  was  a 
uniform  currency  system  with  a  proper  regulation  of 
the  issues  of  the  local  banks,  which  only  a  central  bank 
could  enforce.  Van  Buren's  supporters,  under  the  lead 
of  Wright  and  Benton  declared  (in  the  face  of  the  facts) 
that  the  Bank  of  the  United  States  had  been  unable  to 
prevent  over-issues,  that  it  was  no  part  of  the  govern- 
ment's duty  to  regulate  exchange,  that  the  people 
wanted  a  separate  establishment,  that  the  public  money 
would  be  more  secure  in  subtreasuries  than  in  banks, 
that  by  this  system  the  use  of  specie  would  be  encour- 
aged and  the  depreciated  bank-notes  rejected,  thus  lead- 
ing to  a  uniform  currency. 

Webster  declared  the  subtreasury  plan  a  conception  Webster  on 
belonging  to  barbarous  times,  leading  to  the  hoarding  p^n™5*5"17 
of  money,  keeping  from  general  use  the  sums  which  the 
government  should  receive  to-day  only  to  pay  out  again 

1  Finance  Report,  1902,  p.  183. 


126  CONTEST  FOR  SOUND  MONEY 

to-morrow.  Other  Whigs  and  some  conservative  Demo- 
crats regarded  the  scheme  as  an  attack  on  the  whole 
credit  system,  sure  to  lead  to  contraction  of  the  cur- 
rency, besides  increasing  the  presidential  patronage  and 
power. 

Calhoun,  now  again  with  the  administration,  admitted 
that  a  central  bank  was  the  true  remedy,  but  as  he  be- 
lieved it  unconstitutional,  he  supported  the  subtreasury 
plan  in  part,  although  finally  voting  against  it. 

In  his  message  in  the  following  December,  Van 
Buren,  reverting  to  his  subtreasury  plan,  thought  he 
saw  popular  demonstration  in  its  favor  in  a  few  local 
elections  which  had  taken  place,  and  hoped  Congress 
would  yield  respect  to  this  expression  of  the  public 
voice.  Congress  again  considered  the  subtreasury 
measure.  The  opposition  received  encouragement  from 
the  resolutions  of  the  legislatures  of  Tennessee,  Penn- 
sylvania, and  New  Jersey,  instructing  their  senators  to 
vote  against  it.  One  New  Jersey  senator  refused  to 
obey  his  instructions,  and  the  bill  passed  the  Senate  in 
March,  1838,  by  a  vote  of  27  to  25;  the  House  again 
rejected  it  by  a  majority  of  14. 

The  opposition  developed  the  argument  that  the 
scheme  was  but  a  continuation  of  the  suggestion  of 
Jackson's  message  of  1829  for  the  ultimate  establish- 
ment of  a  treasury  bank  with  enormous  patronage,  the 
plan  of  Jackson's  "  Kitchen  Cabinet"  for  perpetuating 
the  party  in  power.  The  great  bank  had  been  destroyed, 
and  it  was  now  the  turn  of  the  lesser  ones  to  go,  and 
the  subtreasury  plan  would  develop  into  the  institution 
desired  by  the  party  managers.  Thus  the  President 
would  have  the  supreme  control  of  the  Nation's  purse 
and  patronage. 

These  arguments  were  combated  with  ability  by  the 
Democrats,  who  maintained  that  they  were  for  a  consti- 


THE  PAPER   CURRENCY  127 

tutional  treasury  system  and  were  not  attacking  the 
banks ;  that  the  remedy  against  hoarding,  as  alleged, 
was  to  have  no  surplus  to  hoard ;  that  it  was  much 
better  for  the  people  to  have  the  government  look  after 
its  own  finances  and  not  be  meddling  with  the  banks ; 
that  the  Whigs  themselves  admitted  that  most  of  the 
local  banks  were  unsafe  depositories. 

The  Treasury  funds  ran  very  low  in  May,  1838,  due 
to  the  fact  that  Congress  had  not  provided  for  the  re- 
issue of  the  Treasury  notes  that  were  received  for  taxes. 
The  balance  was  down  to  $216,000  at  one  time,  and  Van 
Buren  sent  a  special  message  to  Congress  in  May  ask- 
ing for  relief.  Accordingly  Congress  at  once  passed  an 
act  permitting  the  reissue  of  the  $10,000,000  authorized 
in  1837.  In  July  it  passed  an  act  amending  the  pro- 
vision of  the  law  of  1836,  which  prohibited  the  receipt 
of  notes  of  banks  issuing  denominations  under  $$,  so 
the  same  should  not  take  effect  until  October  1,  1838; 
another  prohibiting  the  United  States  Bank  (of  Penn- 
sylvania) from  reissuing  the  old  bank's  notes,  issued 
while  it  was  doing  business  under  its  federal  charter; 
and  another  act  prohibiting  notes  under  $5  in  the  Dis- 
trict of  Columbia.  Congress  also  abrogated  the  "  specie 
circular,"  issued  by  order  of  President  Jackson. 

Van  Buren  repeated  his  recommendations  in  Decern-  Van  Buren 

.on  public 

ber,  1838,  arguing  that  giving  the  banks  public  deposits  deposits, 
merely  induced  expansion  of  an  unhealthful  kind.  As 
to  the  national  bank  plan,  he  was  gratified  that  Congress 
did  not,  as  in  18 16,  permit  the  suspension  of  coin  pay- 
ments to  lead  to  a  reestablishment  of  so  dangerous  an 
institution.  The  policy  of  depositing  public  money  in 
banks  he  regarded  as  a  scheme  for  the  benefit  of  the 
few  against  the  rights  of  the  community  at  large.1 
In  the  canvass  of  1838  for  the  election  of  representa- 

1  Messages  of  Presidents,  Vol.  III. 


128  CONTEST  FOR  SOUND  MONEY 

rives  in  Congress  the  subtreasury  plan  received  much 
attention.  The  result  was  almost  a  defeat  for  the  ad- 
herents of  Van  Buren,  the  control  of  the  House  turning 
upon  the  contested  election  of  five  Whigs  from  New 
Jersey.     The  Democrats  were  seated. 

In  his  message  in  December,  1839,  Van  Buren  made 
his  final  effort  to  have  his  pet  scheme  become  law. 
He  said  that  the  existing  embryonic  subtreasury  sys- 
tem had  worked  well  and  economically ;  the  second  sus- 
pension of  coin  payments  in  1839  emphasized  the  need 
of  becoming  absolutely  independent  of  the  banks; 
speculation  was  too  large  a  part  of  the  business  of 
banks ;  the  dependence  of  banks  upon  each  other,  sub- 
jecting the  country  institutions  to  those  of  the  cities, 
and  the  latter  to  those  of  London,  practically  placed 
the  business  of  every  hamlet  in  the  country  under  the 
influence  of  the  money  power  of  Great  Britain.  Every 
new  debt  contracted  in  England  affected  the  currency 
throughout  this  land,  thus  subjecting  the  interests  of 
our  people  to  whatever  measures  of  policy,  necessity, 
or  caprice  were  resorted  to  by  those  who  control  credits 
in  England.  The  impropriety  of  using  institutions  thus 
affected  as  public  depositories  was  obvious — the  inde- 
pendence of  the  government  would  be  impaired  by  thus 
placing  its  fiscal  affairs  in  the  control  of  foreign  moneyed 
interests. 

Holding  public  deposits  induced  banks  to  favor  heavy 
taxes,  large  appropriations,  and  a  surplus.  The  same 
objection  applied  to  the  use  of  bank-notes  for  revenue 
payments.  He  insisted  upon  payment  in  specie,  instead 
of  letting  the  banks  hold  the  specie  and  the  government 
take  their  promises  to  pay.  The  supposed  danger  of 
confining  the  payments  to  specie  did  not  really  exist; 
only  four  to  five  millions  would  be  necessary,  the  gov- 
ernment's drafts  being  used  in  large  measure  in  lieu  of 


THE  PAPER   CURRENCY  129 

the  actual  coin.  Moreover,  the  use  of  coin  would  tend 
to  bring  more  into  the  country  to  meet  the  demand. 

The  argument  against  banks  applied  equally  against 
one  central  bank;  the  difference  was  only  in  degree. 
He  believed  that  the  states  woul'd  remedy  the  evils  of 
the  depreciated  currency  by  legislation.  Legislation 
and  inflexible  execution  of  the  laws  were  necessary,  and 
the  federal  government  should  cooperate  on  the  lines 
he  suggested  to  bring  about  the  reform.1 

Congress  had  again  authorized  the  reissue  of  the  Treas-  Treasury 

r      n  1  -n  111T.  note  issues. 

ury  notes  of  1837  and  practically  extended  the  limit  to 
#15,000,000.  The  issues  and  reissues  amounted  to 
over  #31,000,000,  but  the  limit  was  never  exceeded. 
These  notes  were  not  authorized  without  much  opposi- 
tion on  constitutional  grounds.  Benton  particularly 
opposed  the  small  denominations ;  Clay  and  Webster 
also  opposed  small  notes. 

The  interest  ran  from  1  per  mille  to  6  per  cent,  the 
former  rate  on  the  smaller  notes,  which  prevented  their 
remaining  out.  The  notes  were  for  a  time  below  par, 
but  at  other  times  commanded  a  premium  of  5  per 
cent. 

Congress  also  took  up  the  subtreasury  bill.  It  was  Subtreas- 
debated  even  more  fully  than  before,  but  practically  passed< 
few  new  arguments  were  adduced  on  either  side  and 
the  discussion  was  largely  political.  The  bill  passed 
the  Senate  by  a  vote  of  24  to  18  and  the  House  by  124 
to  107,  was  signed  by  the  President  July  4,  1840,  and 
at  once  put  in  operation. 

The  act  provided  for  the  collection,  safe-keeping, 
transfer,  and  disbursement  of  public  moneys  by  the 
Treasury  through  treasurers  and  receivers-general,  of 
whom  a  definite  number  were  to  be  appointed  for  the 
purpose;    public  money  was  not  to  be  loaned   or  de- 

1  Messages  of  Presidents,  Vol.  III. 

K 


130  CONTEST  FOR  SOUND  MONEY 

posited  in  bank,  under  severe  penalties,  except  that 
when  a  large  surplus  was  on  hand  it  might  be  spe- 
cially deposited  in  banks  designated  by  the  Secretary, 
but  could  not  be  loaned  by  the  banks ;  the  banks  so 
used  were  to  receive  \  per  cent  commission ;  officers 
handling  the  funds  were  to  be  bonded ;  vaults  were  to 
be  built,  etc.  The  specie  clause,  an  important  feature 
which  nearly  killed  the  bill,  was  modified  so  as  to  have 
all  public  dues  paid  one-fourth  in  specie  for  the  first 
year  and  an  additional  fourth  each  succeeding  year  until 
the  whole  was  so  payable. 
Temporary  Under  the  lead  of  the  safety  fund  banks  of  New 
resump  ion.  York,  whose  period  of  suspension  had  been  limited  by 
law  to  a  year,  resumption  of  coin  payments  began  in 
May,  1838,  but  general  resumption  was  not  brought 
about  until  February,  1839,  after  several  sessions  of  a 
convention  of  bankers  in  Philadelphia.  It  proved  to 
be  short-lived.  The  total  note-issues  had,  it  is  true,  been 
contracted,  apparently  by  $33,000,000,  but  in  many 
sections  coin  payment  was  merely  nominal,  and  thus 
the  conservative  banks,  which  actually  paid  out  coin,  at 
the  same  time  receiving  notes  of  other  banks,  were  the 
sufferers,  being  loaded  up  with  notes  that  were  prac- 
tically irredeemable.  The  contraction  and  general 
liquidation  had  not  been  sufficient.  Biddle's  bank 
particularly  failed  to  serve  as  a  regulator ;  on  the 
contrary,  from  its  preponderating  size  it  was  the  great- 
est source  of  embarrassment.  Suspension  again  took 
place  in  November,  1839,  an<^  continued  until  1842. 
Constitution-  The  question  of  the  constitutionality  of  note-issues  of 
banknotes.6  banks  owned  or  controlled  by  states,  came  before  the 
Supreme  Court  of  the  United  States  from  Georgia  and 
Kentucky  in  1824  and  1829;  the  question  was  finally 
decided  early  in  1837.  It  was  argued  that  as  a  state  could 
not  emit  "  bills  of  credit,"  it  could  not  authorize  such 


THE  PAPER    CURRENCY  131 

emissions  through  a  bank  which  it  owned  in  whole  or 
part.  The  decision  (Briscoe  vs.  Bank  of  the  Common- 
wealth of  Kentucky,  11  Peters)  held  that  in  order  to 
give  notes  the  character  of  "  bills  of  credit "  they  must 
be  issued  by  the  state  on  the  faith  of  the  state,  and  be 
binding  on  the  state.  The  notes  of  the  bank  named 
were  not  such,  but  ordinary  bank-notes,  and  hence  con- 
stitutional issues.  Justice  Story  dissented.  In  the 
case  of  Craig  vs.  Missouri,  in  1830  (4  Peters  140)  it  was 
decided  that  certificates  issued  by  a  state,  made  receiv- 
able for  taxes  and  salaries,  were  bills  of  credit  and  pro- 
hibited by  the  Constitution. 

The  notes  of  state  banks  were  quoted  at  varying  rates  Discount  on 
of  discount.  Thirty-five  per  cent  discount  on  Mississippi 
notes  is  the  lowest  quoted  during  1838  for  notes  that 
actually  passed  at  all.  During  suspension  of  coin  pay- 
ments domestic  exchange  fluctuated  violently ;  bills  on 
Southern  points  were  quoted  from  5  to  25  per  cent  dis- 
count. The  brief  resumption  in  1839  restored  rates  to 
normal  conditions,  the  maximum  being  4-|-  per  cent. 
The  second  suspension  again  brought  about  heavy 
discounts,  continuing  until  1842,  the  greatest  being  17 
per  cent  on  Mobile ;  Cincinnati  and  Nashville  falling  at 
times  to  16.  The  lowest  rate  of  discount  at  New  Orleans 
was  io.1 

All  interests  suffered  greatly  from  the  unsettled 
policy  of  the  government.  The  continuing  controversy 
between  the  supporters  of  a  United  States  bank  as 
against  utilizing  the  state  banks,  and  the  controversy 
between  the  advocates  of  an  independent  treasury  and 
those  who  insisted  that  banks  in  some  form  must  be 
used  in  order  to  keep  current  funds  in  current  use, 
rendered  the  policy  of  the  government  dependent  upon 
whichever  interest   happened   to   be   in   power.     That 

1  Finance  Report,  1876,  pp.  197,  198. 


132 


CONTEST  FOR  SOUND  MONEY 


The  United 
States  Bank 
(of  Pennsyl- 
vania). 


Its  final 
liquidation. 


these  political  agitations  served  to  delay  resumption  is 
unquestionable. 

The  United  States  Bank,  as  we  have  seen,  was  con- 
tinued with  its  $35,000,000  capital  under  a  Pennsylvania 
charter  and  continued  to  exercise  a  very  extensive 
influence  both  at  home  and  abroad.  Biddle  had  pur- 
chased the  shares  of  the  old  bank  from  the  government 
at  about  1 1 5^  and  disposed  of  the  new  ones  abroad  at  120 
to  126.  Through  his  influence  millions  of  dollars  were 
brought  from  Europe  and  invested  in  the  South  and 
West.  No  one  better  than  he  understood  the  whole 
situation.  When  suspension  of  coin  payments  came  in 
May,  1837,  his  bank  also  suspended.  In  his  opinion 
liquidation  was  unavoidable,  but  at  the  same  time  he 
employed  his  credit  abroad  to  bring  about  indulgence  to 
debtors  here,  and  in  view  of  the  fact  that  the  debt  held 
abroad  was  then  about  $200,000,000,  this  service  was 
of  great  value. 

However,  he  became  involved  in  a  gigantic  cotton 
speculation  (that  staple  having  become  the  principal 
export  commodity),  which  resulted  in  heavy  losses :  his 
personal  prestige  suffered  greatly  from  continued  and 
virulent  political  attacks,  and  altogether  his  position  was 
rendered  untenable.  He  resigned  from  the  bank  in 
1839,  leaving  it,  as  he  claimed,  prosperous;  but  after 
three  assignments  and  two  attempts  at  resumption,  all 
in  1 84 1,  the  institution  succumbed,  due  no  doubt  to  its 
having  undertaken  too  great  a  load  under  the  unfavorable 
business  conditions.  Its  notes  and  deposits  were  paid 
in  full,  but  the  stockholders  lost  all,  and  Biddle  was 
impoverished  by  the  catastrophe.1 

The  statements  of  the  bank  during  its  existence  as  a 
state  institution  show  (in  millions  of  dollars) :  — 


1  Sumner,  History  of  Banking  in  United  States. 


THE  PAPER   CURRENCY 
United  States  Bank  of  Pennsylvania  1 


133 


Its  condition. 


Year 

(A 
S 

< 
O 

0 
z 

«  s 

U  CQ 

g 

t/3 

H 

u 
a 
E 
en 

E 

in 

2 
■ 

CA 

s  B 
0  5 

-  — 

H   H 

W    H 

S5 
O 

s 

u 
a 

O 

0 

< 

0 

M 

a 

< 

M 

s 

0 

(A 

H 

«     Eh 

i-  3 

°5 

1837      .     . 

57-4 



2.6 

2.3 

1.2 

1 1.4 

6.9 



1838      .     . 

45-3 

14.9 

3-8 

2.6 



6.8 

12.5 

8.0 

1839      •     • 

41.6 

I8.0 

4.2 

6.8 

4.6 

6.0 

12.8 

9-3 

1840      .     . 

36.8 

I6.3 

i-5 

3-3 

4-7 

6.7 

5-° 

8.1 

These  figures  indicate  the  great  efforts  which  were 
made  to  maintain  the  bank  in  a  dominating  position  and 
yet  conserve  its  strength  ;  there  was  no  undue  expansion 
of  its  circulation  and  a  fair  reserve  of  specie;  but 
doubtless  the  items  of  loans  and  securities  included 
a  large  amount  of  paper  made  worthless  by  the  disasters 
of  1837 ;  the  losses  must  have  been  enormous  to  entirely 
dissipate  the  capital. 

Had  Biddle  avoided  speculation,  pursued  a  conserva- 
tive course,  and  maintained  specie  payments  instead  of 
suspending  (which  he  professed  he  was  able  to  do),  the 
Treasury  would,  as  Gouge  pointed  out,  have  been  mor- 
ally compelled,  under  the  law  of  1836,  to  use  his  bank 
as  one  of  the  very  few  specie-paying  banks,  and  the 
effect  of  this  would  have  so  influenced  Congress  as  to 
cause  the  defeat  of  the  subtreasury  plan. 

A  comparison  of  the  condition  of  the  state  banks 
generally  is  rendered  impracticable  by  reason  of  the 
imperfect  returns  for  1834,  the  first  year  for  which  a 
compilation  appears  in  the  Treasury  reports.  That  the 
expansion  was  quite  general  appears  certain,  and  that  it 
was  greatest  in  the  South  and  West  is  also  demonstrable. 
From  the  most  complete  unofficial  statement  published 
the  following  is  abstracted  (amounts  in  millions):  — 
1  Finance  Report,  1876,  p.  193. 


Condition  of 
state  banks. 


134 


CONTEST  FOR  SOUND  MONEY 


All  Banks 


1834 


1837 


Increase 


Capital    . 
Circulation 
Deposits  . 
Loans 


95 
76 

324 


291 
149 
127 
525 


91 

54 

5' 

20 1 


Comparing  1837  with  1835,  the  following  data  are 
presented  from  the  official  sources,  the  same  states 
being  used  in  each  case :  — 


5  New  England  States : 

1835 

1837 

4  Middle  States : 

1835 

1837 

9  Southern  States : 

1835 

1837 

5  Western  States : 

1835 

1837 


Capital 


53 
65 


5i 

67 


57 


S 
14 


Circula- 
tion 


17 

19 

24 
41 

26 
54 

6 
13 


18 
20 


30 
47 

17 
39 


4 
16 


Specie 


II 
IO 


H 


Loans 


79 
97 

94 
135 

87 
180 


12 
29 


The  expan- 
sion. 


Circulation  increased  in  the  eastern  group  $19,000,000, 
and  loans  $59,000,000,  whereas  in  the  much  more  sparsely 
populated  states  of  the  South  and  West  the  note-issues 
increased  $35,000,000  and  loans  $110,000,000. 

Deprived  of  the  steadying  force  and  conservative 
influence  of  a  national  bank,  and  taught  by  the  disas- 
trous experiences  of  the  several  years  following  the 
expiration  of  the  charter  of  the  second  United  States 
Bank,  some  of  the  states  seemed  to  realize  an  added 


THE  PAPER   CURRENCY  1 35 

sense  of  responsibility,  and  these  enacted  laws  based 
upon  sound  and  conservative  principles  and  provided 
for  intelligent  and  adequate  supervision.  In  Massachu- 
setts, where  thirty-two  banks  had  discontinued,  the  new 
law  provided  for  examinations  by  state  commissioners 
annually,  and  specially  if  found  desirable.  The  Suffolk 
Bank  system  continued,  with  some  improvements,  and 
doubtless  served  to  avert  greater  disaster  to  New  Eng- 
land banks.  Rhode  Island  restricted  loans  and  circula- 
tion of  banks.  Its  banks,  as  well  as  those  of  Connecticut, 
weathered  the  storm  of  1 837-1 840  without  a  failure. 

In  New  York  the  safety  fund,  apparently  through  Safety  fund 
inadvertence  in  legislation,  was  made  applicable  to  all  syse 
the  indebtedness  of  the  banks,  and  proved  altogether 
inadequate.  The  principle  established  was  correct,  and 
had  the  law  providing  for  the  same  been  drawn  with 
sufficient  detail  and  with  sufficient  solicitude  for  its  en- 
forcement, its  practical  working  would  have  vindicated 
the  principle.  A  careful  analysis  shows  that  slight 
changes  would  have  achieved  well-recognized  success 
instead  of  failure.  The  principle  made  the  banks 
mutually  insure  the  redemption  of  the  notes  of  all  by 
contributing  to  a  safety  fund  an  amount  annually  which 
any  bank  could  well  afford  to  pay  for  the  privilege 
of  note-issue.  Each  bank  contributed  annually  an 
amount  equal  to  \  per  cent  of  its  capital  until  the  same 
equalled  3  per  cent  of  the  total  bank  capital.  The 
tax  should  have  been  predicated  upon  the  volume  of 
note-issues.  Had  care  been  taken  to  prevent  over-issues, 
and  had  the-  fund  been  limited  in  its  application  to  the 
circulation  of  the  banks,  it  would  have  been  sufficient  to 
protect  all  note  holders  from  loss,  as  shown  by  Millard 
Fillmore  in  his  report  as  Comptroller  of  the  state  of 
New  York  (1848).  The  legislature  felt  impelled  to 
waive  the  penalty  of  forfeiture  of  charters,  on  account 


136 


CONTEST  FOR  SOUND  MONEY 


First  free 
banking  law. 


Bond 

deposit  plan 
considered. 


of  suspension  of  coin  payments,  which  the  law  provided, 
because  of  adverse  business  conditions,  but  more  espe- 
cially because  suspension  had  been  very  general  through- 
out the  country.  Prior  to  this  period  all  bank  charters 
had  been  granted  by  special  act  of  the  legislature,  and 
were  regarded  as  patronage  to  be  extended  to  political 
favorites.1  To  avoid  the  scandals  growing  out  of  this 
practice  and  to  avoid  the  just  charge  of  monopoly,  a 
"free  banking"  law  was  passed  in  1838. 

As  finally  adjusted,  the  law  provided  that  one  or 
several  persons  might  qualify  and  enjoy  the  right  of 
issuing  notes  to  circulate  as  money.  By  depositing  with 
the  state  comptroller  stocks  of  the  United  States,  of  the 
state  of  New  York,  or  of  any  other  state  approved  by 
the  comptroller  and  by  valuation  made  equal  to  a  5 
per  cent  stock  of  the  state  of  New  York ;  or  by  depos- 
iting bonds  bearing  not  less  than  6  per  cent  secured 
by  mortgage  on  productive,  unencumbered  real  estate 
worth  double  the  amount  of  the  mortgage ;  the  right  to 
receive  circulating  notes  for  an  equal  amount  was  es- 
tablished. In  case  of  default  these  securities  were  to  be 
sold  and  the  notes  redeemed  with  the  proceeds.  Inter- 
est on  the  securities  deposited  was  paid  to  the  party 
depositing  the  same,  so  long  as  there  was  no  failure  to 
redeem  notes  and  the  security  was  deemed  adequate. 
Provision  was  made  for  the  surrender  of  notes  and  the 
return  of  securities.  The  state  in  no  wise  guaranteed 
the  notes.  A  reserve  of  at  least  \2\  per  cent  in  specie 
was  required,  and  refusal  to  redeem  notes  brought  a 
penalty  of  14  per  cent. 

Under  this  system  the  number  of  banks  at  once  in- 
creased rapidly.  Individuals  in  need  supplied  mort- 
gages to  be  deposited  as  a  basis  for  circulation  upon 
condition  of  obtaining  accommodations.     Very  many  if 

1  Fillmore,  Report  Comptroller,  New  York,  1 848. 


THE  PAPER   CURRENCY  137 

not  most  of  the  banks  organized  under  this  law  were 
started  for  the  sole  purpose  of  issuing  notes,  and  were 
not  banks  of  discount  and  deposit.  They  simply  con- 
verted the  securities  which  they  deposited  with  the  state 
authorities  into  bank  bills.  Had  the  note-issues  been 
merely  an  incident  or  adjunct  to  a  regular  banking  busi- 
ness the  system  would  have  had  a  fairer  test.  It  was  not, 
however,  comparable  to  the  safety  fund  system,  since  no 
bond-secured  circulation  can  possess  elasticity.  The 
first  case  of  failure  occurred  in  1840,  and  the  bank's 
securities  realized  sixty-eight  cents  on  the  dollar  of  its 
note-issues.  Mortgages  were  not  convertible,  and  the 
legislature  in  1843  limited  securities  which  might  be 
deposited  to  stocks  of  the  state  of  New  York.  Later 
the  act  was  amended  so  as  to  include  United  States 
bonds.  In  order  to  prevent  individuals  residing  in  one 
place  from  issuing  notes  payable  in  another,  a  law  was 
passed  requiring  all  interior  banks  to  redeem  their  notes 
either  in  New  York  or  Albany  at  not  exceeding  1  per 
cent  discount  (subsequently  made  \  per  cent),  and 
later  that  no  one  should  transact  the  business  of  a 
banker  except  at  his  place  of  residence,  and  still  later 
all  banks  were  required  to  be  banks  of  discount  and 
deposit  as  well  as  of  circulation.  In  1846  the  new 
constitution  prohibited  organization  of  banks  except 
under  the  general  law,  prohibited  the  legislature  from 
authorizing  the  suspension  of  specie  payments,  imposed 
the  double  liability  of  shareholders,  and  made  note 
holders  preferred  creditors. 

The  legislature  seemed  disposed  to  correct  the  faults  of  Results  in 
the  system,  and  had  not  the  Civil  War  intervened  it  is 
fair  to  assume  the  New  York  bank  system  would  have 
been  perfected.  From  the  passage  of  the  free  banking 
act  up  to  1850,  thirty-two  banks  failed,  entailing  a  loss 
upon  note  holders  of  $325,487,  some  paying  as  low  a 


138 


CONTEST  FOR  SOUND  MONEY 


Michigan 
"  wild  cat " 
currency. 


percentage  as  thirty  cents  on  the  dollar.  From  1850  to 
1 86 1 ,  twenty-five  failures  entailed  a  loss  upon  note  holders 
of  only  $72,849.  *  In  view  of  the  crisis  in'  1857  these 
statistics  show  an  improving  condition. 

The  free  banking  system  with  bond-secured  circulation 
was  adopted  in  many  other  states,  notably  Illinois,  In- 
diana, and  Wisconsin.  In  many  it  met  with  unfortunate 
results,  in  some  with  indifferent  success.  The  first 
effect  was  inflation  of  note-issues.  Note-issues  were 
the  one  certain  resource  for  obtaining  credit,  and  public 
sentiment  would  not  apply  wholesome  restraint  and 
enforce  conservative  management.  The  system  in  our 
principal  states  was  rapidly  improving,  however,  when 
the  crisis  of  the  Civil  War  overtook  the  country,  and 
that  resulted  in  substituting  what  every  interest  and 
every  industry  required  —  a  national  system  of  currency. 

The  condition  of  Michigan  banks  during  this  period 
gave  the  name  "  red  dog  "  and  "  wild  cat  "  currency  to 
the  notes  of  the  mushroom  banks  generally.  A  dog  in 
red  color  and  the  wild  cat  were  common  imprints  upon 
their  current  bills.  Michigan  had  (1839)  endeavored  to 
imitate  Indiana  with  a  state  bank  and  branches,  but 
while  the  plan  was  the  same,  the  management  was  radi- 
cally different,  to  the  cost  of  the  note  holders.  Two  of 
these  Michigan  banks  held  $1,800,000  public  moneys 
when  their  capital  as  reported  was  less  than  $600,000 
and  specie  $i22,ooo.2 

In  many  of  the  states  the  suspension  of  coin  payments 
for  a  limited  time  was  legalized,  and  stay  laws3  again 
appeared  upon  the  statute  books. 

The  banks  of  states  (i.e.  banks  in  which  states  were 
interested  as  owners  of  stock)  proved  in  most  instances 
costly  experiments.     Political  influences  entered  into  the 

1  White,  Money  and  Banking.  2  Finance  Report,  1876,  p.  200. 

3  Sumner,  History  of  Banking  in  United  States. 


THE  PAPER   CURRENCY  139 

management  and  control  in  many  commonwealths  to  the 
great  detriment  of  their  business  interests,  and  where 
states  had  issued  bonds  to  capitalize  such  banks,  the 
people  had  them  to  pay  by  means  of  taxation.  There 
were,  however,  notable  exceptions.  As  before  stated, 
Delaware  and  South  Carolina  had  very  successful  state 
banks. 

The  Indiana  state  bank  was  phenomenally  successful. 
It  consisted  of  ten  branches,  each  with  a  capital  of 
^160,000,  the  parent  bank  located  at  Indianapolis  being 
practically  a  board  of  control,  and  exercising  its  bank- 
ing functions  through  its  branches.  The  bank  was 
chartered  for  a  period  of  twenty-five  years  immediately 
after  Jackson's  veto  of  the  renewal  charter  of  the  second 
United  States  Bank,  and  was  exclusive  in  character. 
The  state  owned  one-half  the  stock,  and  individuals  one- 
half,  all  of  which  was  paid  in  in  specie.  The  state  issued 
bonds  with  which  to  raise  funds  for  its  part  of  the 
capital,  and  also  advanced  to  individuals  62^  per  cent 
of  their  subscriptions,  taking  a  lien  upon  their  shares, 
and  also  real  estate  security  as  collateral  to  such 
advances.  The  president  and  four  directors  of  the 
parent  bank  were  chosen  by  the  legislature,  and  one 
director  by  the  private  stockholders  of  each  branch. 
The  assets  of  each  branch  belonged  to  its  shareholders 
exclusively,  and  the  branch  was  managed  by  the  local 
shareholders  subject  tp  the  parent  board  at  Indianapolis, 
which  alone  could  declare  dividends.  In  this  manner 
each  branch  reaped  the  benefit  of  superior  manage- 
ment and  greater  earnings,  and  had  every  incentive 
to  energy  and  conservatism. 

Each  branch  was  liable  for  the  debts  of  every  other  its  organiza- 
branch,  and  in  case  of  insolvency  its  indebtedness  must  branches. 
be  liquidated  within  one  year.     This  induced  an  inter- 
ested if  not  a  jealous  watchfulness  of  each  other,  and  a 


140  CONTEST  FOR  SOUND  MONEY 

most  intelligent  and  vigorous  system  of  examinations 
and  supervision  on  the  part  of  the  central  board.  Loans 
exceeding  $500  could  only  be  made  by  a  five-sevenths 
majority  of  the  board,  the  vote  and  the  names  to  be 
entered  on  the  minutes,  and  officers  and  directors  could 
not  vote  upon  a  proposition  in  which  they  were  finan- 
cially interested.  Directors  were  individually  liable  for 
any  loss  resulting  from  loans  made  in  violation  of  the 
law  unless  they  could  prove  they  voted  in  opposition. 
Favoritism  in  loans  to  officers  and  directors  was  for- 
bidden. The  insolvency  of  any  branch  was  presump- 
tively fraudulent,  and  unless  the  fraud  was  disproved, 
the  directors  were  liable  without  limit  for  the  debts. 
After  their  estates  were  exhausted  the  other  stockholders 
were  liable  for  an  amount  equal  to  the  par  of  their  stock. 
Any  director  in  order  to  protect  his  estate  must  be  pre- 
pared to  prove  good  faith,  and  this  insured  a  high  degree 
of  efficiency  and  conservatism.  Loans  upon  their  own 
stock  were  forbidden.     (See  statement  p.  154.) 

The  debts  to  or  from  any  branch  except  on  account 
of  deposits  could  not  exceed  twice  the  capital  stock. 
The  intended  and  actual  effect  of  this  provision  was  to 
limit  the  circulating  notes  to  twice  the  capital.  Redis- 
counts or  loans  by  banks  at  that  time  were  very  uncom- 
mon. No  bank  would  borrow  from  another  and  pay 
interest  thereon  when  it  could  issue  its  circulating  notes 
without  interest.  Each  branch  redeemed  its  notes  in 
specie  on  demand  and  was  compelled  to  receive  the  notes 
of  all  other  branches.  The  notes  were  signed  by  the 
president  and  issued  to  the  branches  by  the  parent  bank. 
Discounts  could  not  exceed  two  and  one-half  times  the 
capital.  Restriction  upon  voting  the  shares  prevented 
monopolization. 

The  bank  was  liquidated  at  the  expiration  of  its  char- 
ter, netting  stockholders  $153.70  in   addition   to   good 


institution. 


THE  PAPER   CURRENCY  141 

dividends,  which  it  paid  regularly.  The  state  realized, 
after  the  payment  of  principal  and  interest  of  the  bonds 
issued  in  capitalizing  the  same,  $3,500,000  net  profit.1 

This  was  a  model  bank  in  every  respect.  With 
independent  ownership  of  assets  and  joint  liability  for 
debts,  the  greatest  degree  of  efficiency  and  watchful- 
ness was  secured  in  the  separate  branches,  and  though 
widely  separated,  they  were  for  all  essential  purposes 
closely  woven  together  as  one  harmonious  whole.  It  is 
an  exemplary  illustration  of  the  efficacy  of  branch  bank-  A  model 
ing  as  a  system.  It  is  an  equally  potent  illustration  of 
the  safety  and  efficiency  of  credit  or  asset  currency  when 
administered  by  a  good  system  with  competent  manage- 
ment. It  also  presents  supervision  and  examination  in 
its  ideal  form.  Examination  by  a  government  examiner, 
compensated  by  a  lump  sum  without  regard  to  the  time 
expended  or  labor  involved,  is  very  valuable ;  but  exami- 
nation by  an  expert  banker,  an  accountant,  a  judge  of 
credits  who  inventories  both  assets  and  liabilities,  knows 
the  symmetry  and  proportion  of  banking  in  that  particular 
locality,  and  can  judge  intuitively  whether  in  any  depart- 
ment or  in  any  respect  the  rules  of  prudence  have  been 
infringed ;  who,  in  short,  sees  all  and  judges  all  through 
the  eye  of  a  stockholder  and  from  the  standpoint  of  divi- 
dends —  such  examinations  are  effective,  are  ideal. 

To-day  deposits  are  the  main  instrumentality  which 
enables  banks  to  extend  loans  and  discounts  to  their 
patrons.  Capital  and  surplus  are  the  margin  of  safety 
that  commands  public  confidence.  Circulating  notes 
are  a  trivial  factor  at  best,  and  really  do  not  count  at  all, 
since  more  money  is  invested  in  bonds  as  security  than 
is  received  in  return  in  notes.  At  that  time  deposits 
were  a  meagre  factor  and  circulating  notes  counted 
twice  as  much  as  capital  stock,  even  in  this  strong  and 

1  White,  Money  and  Banking. 


142 


CONTEST  FOR  SOUND  MONEY 


conservative  bank.  Circulating  notes  counted  in  much 
greater  ratio  in  less  conservative  banks,  and  were  practi- 
cally the  only  resource  in  many.  This  explains  why  the 
people  clung  to  and  supported  the  note-issuing  function 
of  banks  when  security  was  so  meagre  and  inevitable 
losses  so  great.  There  was  practically  no  other  resource 
for  extending  to  them  loans.  Bank-notes  were  the  most 
convenient  means  of  utilizing  loans  in  the  circumscribed 
limits  of  trade  at  that  time.  Credit  on  the  books  of  the 
banks  to  be  utilized  by  checks  and  drafts  were  little  used. 

The  severe  strictures  upon  the  banks  owned  and 
conducted  by  states  are  as  a  general  proposition  wholly 
justified.  There  were,  however,  exceptions,  whose 
organization  and  management  would  prove  safe  models 
at  the  present  time  with  all  our  added  experience  and 
with  all  our  wonderfully  increased  facilities  for  the  trans- 
mission of  credit  and  exchange  of  values.  Such  an  one 
is  the  state  bank  of  Indiana.  It  maintained  the  highest 
credit  at  all  times  and  supplied  the  needs  of  the  com- 
mercial public.  Its  notes  were  at  all  times  redeemed 
in  specie,  even  in  the  panic  of  1857,  when  all  the  banks 
in  the  Eastern  states  and  in  New  York  (except  the 
Chemical)  were  forced  to  suspend. 

The  state  of  Louisiana  in  1842  enacted  a  general 
banking  law  which  embodied  the  sound  principles  of 
banking  which  experience  with  state  and  United  States 
banks  had  demonstrated.  It  also  contained  some  restric- 
tions, which,  however  practical  then,  would  interfere  with 
legitimate  business  now.  No  bank  could  have  less  than 
fifty  shareholders  owning  not  less  than  thirty  shares  of 
stock  each,  hence  minimum  capital  of  $150,000.  Specie 
reserve  against  all  liabilities  of  33^  per  cent  was  required  ; 
all  banks  were  to  be  examined  by  a  board  of  state  officers 
quarterly  or  oftener  ;  directors  were  personally  liable  for 
all   loans  approved  by  them  and  which  were  made  in 


THE  PAPER   CURRENCY  143 

violation  of  law ;  no  bank  could  pay  out  any  notes  but 
its  own  ;  all  banks  were  required  to  pay  their  balances 
to  each  other  every  Saturday  under  penalty  of  being  put 
in  liquidation.  The  above  requirements  were  wholesome 
and  in  the  interest  of  good  banking,  and  afford  the  first 
instance  of  a  legal  requirement  of  a  definite  reserve. 
Some  other  requirements  that  seem  to  reflect  somewhat 
upon  the  standard  of  commercial  honor  at  that  time  were 
as  follows  :  no  commercial  paper  having  more  than  ninety 
days  to  run  could  be  discounted  or  purchased,  and  none 
could  be  renewed  ;  if  any  paper  was  not  paid  at  maturity 
or  a  request  for  its  renewal  made,  the  account  of  the 
party  was  to  be  closed  and  his  name  posted  as  a  delin- 
quent and  other  banks  advised ;  any  director  being 
absent  from  the  state  for  more  than  thirty  days  or  fail- 
ing to  attend  five  successive  meetings  was  deemed  to 
have  resigned  and  the  vacancy  filled  at  once.  This  law 
was  in  successful  operation  until  interrupted  by  the 
events  of  the  Civil  War  in  1862. 

The  state  bank  of  Ohio  (organized  in  1845)  was  The  Ohio 
similar  to  the  state  bank  of  Indiana.  Any  number  of  sysem* 
banks  not  less  than  seven  might  compose  its  branches. 
These  might  be  existing  banks  or  those  organized  for 
the  purpose.  It  started  with  a  capital  of  $3,300,000. 
The  branches  could  issue  notes  in  a  ratio  graduated  to 
their  capital;  for  the  first  $100,000  of  capital,  $200,000 
of  notes  ;  for  $200,000  capital,  $3  50,000  notes,  the  amount 
of  notes  diminishing  as  the  capital  increased.  The 
branches  were  required  to  maintain  a  reserve  fund  with 
the  central  board  of  control  equal  to  10  per  cent  of  their 
circulating  notes.  The  central  board  of  control  could 
invest  this  in  bonds  of  Ohio  or  the  United  States  or  in 
real  estate  mortgages,  the  interest  inuring  to  the  respec- 
tive branches.  All  branches  were  jointly  liable  for  the 
notes  of  each,  but  not  for  its  general  debts.     In  case  of 


144 


CONTEST  FOR  SOUND  MONEY 


failure  of  any  branch  to  redeem  its  notes,  the  board  of 
control  immediately  assessed  the  branches  pro  rata  and 
raised  sufficient  funds  to  redeem  such  notes,  and  then 
reimbursed  the  branches  as  soon  as  the  assets  in  the 
safety  fund  could  be  reduced  to  cash  for  that  purpose, 
and  in  turn  reimbursed  the  safety  fund  from  the  assets 
of  the  failed  branch,  the  claim  for  such  reimbursement 
having  a  prior  lien.  The  bank  ceased  to  exist  with  the 
expiration  of  its  charter  in  1866,  the  national  bank  sys- 
tem having  rendered  state  banks  less  desirable.  It  had 
thirty-six  branches,  and  was  well  managed  and  successful.1 
Van  Buren's  victory  in  establishing  the  subtreasury 
system  was  short-lived.  In  the  presidential  contest  of 
1840,  the  subtreasury  question  being  at  issue,  the  Whigs 
elected  Harrison  and  a  congress  (both  houses)  by  large 
majorities.  Van  Buren,  in  his  last  message  (December, 
1840),  insisted  that  the  subtreasury  system  was  working 
satisfactorily ;  nevertheless,  its  abolition  had  apparently 
been  decreed  by  the  popular  vote.  Harrison  called  Con- 
gress to  meet  in  extra  session  on  May  31,  but  he  died  in 
April,  and  the  Whig  leaders  who  had  nominated  and 
elected  Tyler  as  Vice-President  because  of  his  views 
against  the  subtreasury  act,  found,  when  he  succeeded 
to  the  presidency,  that  he  did  not  agree  with  Clay,  the 
actual  leader  of  the  party.  The  act  repealing  the  sub- 
treasury  law  passed  by  a  vote  of  29  to  18  in  the  Senate 
and  134  to  87  in  the  House,  and  became  a  law  August  9. 
The  repeal  of  the  deposit  act  of  1836  was  also  speedily 
accomplished.  Meanwhile  Tyler's  Secretary  of  the 
Treasury,  Thomas  Ewing,  had,  by  request  of  Congress, 
prepared  the  President's  plan  for  a  "  fiscal  bank,"  to  be 
located  in  the  District  of  Columbia  :  capital  $30,000,000, 
of  which  the  United  States  was  to  take  two-tenths,  the 
states  three-tenths,  to  be  paid  for  by  the  United  States 

1  White,  Money  and  Banking. 


THE  PAPER   CURRENCY  145 

in  place  of  the  "  fourth  instalment  of  surplus,"  not  yet  A  central 
distributed,  and  to  which  the  states  seemed  to  think  they 
had  a  claim ;  with  branches  to  be  located  in  the  states 
07ily  after  their  assent.  The  latter  proviso  was  the  chief 
point  of  controversy.  Under  the  influence  of  Clay  this 
feature  of  the  bill  was  remodelled  so  as  to  provide  that 
unless  the  legislatures  actually  dissented  at  once  it  was 
to  be  presumed  that  they  had  no  objection.  The  Senate 
passed  it  26  to  23,  the  House  128  to  97.  Tyler  vetoed 
this  bill  in  August,  1841. 

The  special  features  of  the  bill  were  :  that  the  parent 
bank  was  to  make  no  loans  except  to  the  government 
in  accordance  with  law ;  dividends  were  limited  to  7  per 
cent,  any  surplus  earnings  to  go  to  the  government; 
the  debts  were  limited  to  if  times  the  capital  and 
$25,000,000  in  excess  of  deposits ;  loans  were  not  to  be 
renewable  and  were  to  cease  when  circulation  reached 
more  than  thrice  the  specie  on  hand;  dealing  in  stocks 
and  commodities  was  prohibited.  The  objection  of 
Tyler  (a  Virginian  and  strict  constructionist)  was  chiefly  Tyler's  veto, 
that  it  was  unconstitutional  to  authorize  branches  in  the 
states  without  their  consent,  but  he  also  objected  to  giv- 
ing the  bank  the  discounting  privilege.1 

The  actual  difference  between  the  bill  drafted  by 
Ewing  for  the  President,  and  that  reported  by  Clay  and 
passed  was  very  slight. 

The  will  of  the  people  as  expressed  at  the  polls  was 
ignored,  the  establishment  of  a  central  bank  and  thereby 
a  uniform  system  of  paper  currency,  national  in  charac- 
ter, was  also  defeated  by  this  hair-splitting  construction 
of  the  Constitution,  extreme  assertion  of  state  sover- 
eignty, and  jealous  determination  to  minimize  the  powers 
of  the  federal  government. 

The  Whigs  were  angered  by  the  veto  upon  such  a 

1  Messages  of  Presidents,  Vol.  IV. 

L 


146  CONTEST  FOR  SOUND  MONEY 

slender  pretext.  Webster,  who  was  Secretary  of  State, 
counselled  yielding,  since  the  end  was  to  obtain  a  means 
of  regulating  the  currency,  equalizing  exchanges,  and 
taking  care  of  public  moneys.  It  was  reported  that 
Tyler  had  agreed  to  sign  the  Ewing  bill.  He  outlined 
in  his  veto  message  the  kind  of  a  bill  he  would  sign ; 
accordingly  such  a  bill  was  drawn  and  approved  by 
Webster,  who  took  it  to  Tyler,  who  also  approved  it, 
whereupon  Congress  passed  it  September  3.  In  the 
meantime  John  Minor  Botts,  representative  from  Vir- 
ginia, had  written  a  violent  letter  in  which  Tyler  was 
charged  with  currying  favor  with  the  Democrats.  The 
letter  was  published,  and  naturally  Tyler  was  offended. 
He  then  desired,  as  Ewing  says,  to  have  the  bill  post- 
poned, which  did  not,  however,  suit  the  Whigs,  and  the 
legislation  was  hurried  through  as  stated.  Tyler  vetoed 
the  bill  on  September  9,  and  the  Whigs  could  not  pass 
it  over  the  veto.  The  entire  cabinet  thereupon  re- 
signed, excepting  Webster,  who  remained  for  some  time 
in  order  to  complete  with  dignity  certain  important 
negotiations  with  foreign  countries.1 

Ewing  in  his  letter  of  resignation  pointed  out  the 
inexplicable  inconsistencies  of  Tyler's  second  veto,  de- 
claring unequivocally  that  the  very  features  objected  to 
were  approved  by  Tyler  before  the  bill  was  introduced, 
and  some  of  them  included  upon  his  own  suggestion. 
He  properly  resented  Tyler's  action  in  having  him 
(Ewing)  prepare  a  bill  upon  lines  to  satisfy  the  earlier 
objections,  and  then  vetoing  it  without  consulting  him. 
These  statements  of  Ewing's  were  publicly  confirmed 
by  at  least  two  other  members  of  the  cabinet,  showing 
such  a  breach  of  faith  toward  the  Secretary  of  the 
Treasury  as  made  his  remaining  in  office  impossible.2 

From  the  evidence  it  was  clear  (1)  that  Tyler  was 

1  Statesman's  Manual,  Vol.  II.  2  Ibid. 


THE  PAPER   CURRENCY  147 

desirous  of  establishing  some  form  of  fiscal  corporation  Tyler's 

r  1  /  anomalous 

to  perform  the  functions  set  forth  above,  (2)  that  he  position, 
was  hypercritical  and  hair-splitting  on  the  constitutional 
point,  (3)  that  in  view  of  the  Botts  letter  the  Whigs 
should  have  postponed  action  as  Webster  said,  (4)  that 
notwithstanding  the  Botts  letter,  which  did  not  alter  the 
facts,  Tyler  was  not  justified  in  vetoing  the  bill  which 
he  had  previously  approved;  by  so  doing  he  placed  his 
personal  feelings  above  his  public  duty  respecting  a 
great  public  measure. 

Webster's  view  that  Tyler  was  sincerely  trying  to 
adjust  his  constitutional  views  to  the  occasion,  appear 
to  be  borne  out  by  the  second  veto  message  in  which 
Tyler  literally  implored  Congress  not  to  press  the  dif- 
ferences on  this  measure  to  a  rupture  of  harmony. 
Postponement  for  more  deliberation  was  asked,  in  terms 
which  showed  anxiety. 

The  Democrats  could  not  resist  exulting,  and  the  Whig 
leaders  denounced  Tyler,  declaring  political  cooperation 
with  him  at  an  end.  But  many,  like  Webster,  believed 
in  waiting.  The  new  cabinet  included  a  number  of  dis- 
tinguished Whigs,  Walter  Forward  becoming  Secretary 
of  the  Treasury. 

With  both  the  subtreasury  act  and  the  deposit  law  of 
1836  repealed  the  Treasury  fell  back  upon  the  system 
in  use  prior  to  the  establishment  of  the  first  Bank  of  the 
United  States,  a  sort  of  half  independent  treasury,  half 
bank-deposit  system.  The  Treasury  was  at  this  time 
still  borrowing  money. 

The  congressional  election  of  1842  was  won  by  the 
Democrats,  the  Senate  remaining  Whig,  and  legislation 
was  therefore  blocked. 

Interest-bearing    Treasury   notes   were   issued   quite  Treasury 

,         ,      .  ,  .  .     .  note-issues. 

extensively   during    these    years,    in   the    usual    form. 
Early  in  1843  it  was  necessary  to  ask  for  authority  to 


148  CONTEST  FOR  SOUND  MONEY 

reissue  redeemed  notes.  In  all  $43,000,000  Treasury 
notes  were  used.1  Forward  was  succeeded  in  the  Treas- 
ury by  John  C.  Spencer. 

In  1844  the  Whigs  with  Clay  as  candidate  for  the 
presidency  suffered  severe  defeat.  Polk,  formerly 
Speaker,  was  chosen. 

Tyler  had  continued  in  his  messages  to  urge  his  plan 
upon  Congress,  but  without  avail.  He  referred  to  the 
use  by  the  people  of  the  Treasury  notes  as  evidence 
that  his  plan  of  using  such  notes  secured  by  a  specie 
reserve  would  have  proved  satisfactory. 

Polk  had  continually  been  opposed  to  the  national 
bank.  In  his  message,  December,  1845,  he  also  op- 
posed the  use  of  state  banks,  not  only  because  they  had 
proved  faithless,  but  upon  constitutional  grounds,  point- 
ing out  that  as  there  were  only  four  banks  in  the  coun- 
try when  the  Constitution  was  adopted,  it  could  not  have 
been  contemplated  holding  public  money  anywhere  but 
Polk's  sub-  in  a  national  treasury.  He  therefore  urged  the  estab- 
pia^1"7  lishment  of  a  "  constitutional  treasury,"  a  more  elabo- 

rate measure  than  that  of  Van  Buren,  to  absolutely 
divorce  the  government  from  the  banks,  and  prevent 
the  latter  from  using  the  public  moneys  for  private  gain.2 
He  was  ably  supported  by  his  Secretary  of  the  Treas- 
ury, Robert  J.  Walker  (Mississippi),  who  took  the  ex- 
treme view  that  it  was  necessary  to  exclude  bank-notes 
from  the  revenues  entirely,  because  it  would  be  useless 
to  have  an  independent  treasury  receiving  and  disburs- 
ing bank  paper. 

The  advocates  of  a  national  bank,  as  the  proper 
solution  of  the  currency  difficulties  and  the  best  in- 
strumentality through  which  the  government  could 
transact  its  fiscal  affairs,  failed  to  establish  such  an 
institution  owing  to  the  successive  vetoes  of  Tyler.     If 

1  Knox,  United  States  Notes.  2  Messages  of  Presidents,  Vol.  IV. 


object. 


THE  PAPER    CURRENCY  1 49 

with  both  branches  of  Congress  in  political  accord  and 
favorable  they  failed  to  establish  a  national  bank,  one 
was  not  likely  to  be  established  under  any  circum- 
stances, and  public  sentiment  turned  in  other  directions. 
The  evidence  was  cumulative  and  clear  that  the  state 
banks  could  not  be  relied  upon,  and  under  the  cir- 
cumstances no  doubt  public  opinion  favored  the  sub- 
treasury  measure.  The  act  was  clearly  a  device  to  H» 
protect  the  government's  money  and  at  the  same  time 
avoid  any  regulation  of  the  currency  by  the  federal 
government,  under  the  plea  that  Congress  had  no 
constitutional  power  over  the  same.  If  Congress  were 
conceded  the  undelegated  power  to  regulate  paper 
currency,  other  similar  powers  might  be  assumed,  for 
instance  the  power  to  interfere  with  slavery. 

Congress  took  up  the  subject  at  once,  and  after  long 
debate  passed  Polk's  measure,  in  the  House  by  123  to 
67,  in  the  Senate  by  28  to  24.  It  was  approved  by  the 
President  August  6,  1846. 

Thus  in  a  government  for  the  people  and  controlled 
by  them,  it  was  claimed  by  the  leaders  in  public  life  of 
that  day  that  no  matter  how  imperfect,  unsafe,  or  dis- 
graceful, even,  the  existing  paper  currency  systems 
might  be,  there  was  no  remedy  which  could  provide  a 
safe,  sound,  and  uniform  paper  medium.  So  the  make- 
shift to  provide  only  for  the  safety  of  the  government 
revenues  was  enacted,  supported  solidly  by  those  who, 
under  Benton's  lead,  insisted  that  the  country's  busi- 
ness could  be  done  by  the  use  of  specie  only,  arguing 
that  the  example  of  the  government  would  be  followed 
by  all. 

The  chief   features  of   the  act  were  the  prohibition  Thesub- 
against  depositing  public  moneys  in  banks,  or  dispos-  0fI846. 
ing  of  them  in  any  manner  other  than  in  payments  of 
Treasury  drafts  or  transfer  orders.     The  officers  of  the 


150  CONTEST  FOR  SOUND  MONEY 

government  were  required  to  hold  the  funds  "  safely n 
in  the  meantime;  revenues  were  after  January  i,  1847, 
all  to  be  paid  in  specie  or  Treasury  notes,  and  severe 
penalties  for  disregard  of  the  act  were  imposed.1 

Years  elapsed  before  the  officers  of  the  government 
were  provided  with  proper  facilities  for  safely  handling 
funds.  Gouge,  the  official  examiner  of  subtreasuries, 
reported  in  1854  that  Western  depositories  were  in- 
adequately protected.  He  found,  for  example,  the 
subtreasury  at  Jeffersonville,  Indiana,  in  a  tavern  ad- 
joining the  bar-room,  with  which  it  was  connected  by 
a  door  with  glass  lights,  so  that  the  subtreasurer  might, 
when  in  the  bar-room,  see  into  his  office.  The  entrance 
for  the  public  was  through  a  back  passage  under  a 
stairway.  The  office  was  divided  into  two  rooms  by 
a  temporary  partition,  lighted  by  a  single  window  de- 
fended by  iron  grates.  The  silver  was  kept  in  wooden 
boxes,  the  gold  in  an  iron  safe.  The  subtreasurer 
slept  in  one  of  the  rooms  with  his  weapons.2 

The  requirement  that  all  payments  be  made  in  specie 
was  not  rigidly  carried  out.     It  was  indeed  practically 
impossible  at  post-offices,  etc.,  but  in  the  main,  Walker 
was  gratified  with  the  result. 
Mexican  The  war  with  Mexico  occurred  at  this  period  (1846), 

and  the  government  being  constrained  to  borrow  made 
use  of  its  notes  to  the  extent  of  $20,000,000,  which  paid 
current  expenditures  and  went  into  general  circulation 
as  money.  Bond  issues  were  also  resorted  to,  and  were 
in  part  used  to  fund  the  notes  above  mentioned. 

Both  Polk  and  Walker  pointed  with  pride  to  the 
"  constitutional  treasury  "  which  had  by  preventing  in- 
flation and  suspension  during  the  war  period  enabled 
the  government  to  issue  its  notes  freely  and  sell  its 
bonds  at  a  premium.     Such  were  the  facts.     True,  the 

1  See  Appendix.  2  Finance  Report,  1854. 


THE  PAPER   CURRENCY  151 

war  was  a  short  one,  and  not  nearly  so  expensive  as  Mexican 
that  of  1812;  furthermore,  the  existing  banks  had  but  ing. 
recently  passed  through  a  period  of  liquidation  and 
contraction,  bringing  about  sounder  conditions,  all  of 
which  served  to  aid  the  Treasury.  Polk  maintained 
that  the  country  was  saved  from  the  effect  of  the 
crisis  of  1847  in  Great  Britain  by  the  check  both  upon 
bank-note  inflation  and  the  resulting  speculation.1 

The  execution  of  the  law  showed  many  defects  which 
both  Polk  and  Walker  asked  Congress  in  vain  to  remedy. 
The  war  and  the  tariff  occupied  the  legislators'  atten- 
tion. The  issues  growing  out  of  the  tariff  caused  the 
defeat  of  Polk  and  the  success  of  the  Whigs  with  Taylor 
in  the  presidential  contest  of  1848. 

Whenever  specie  payments  were  suspended  there  The  state 
occurred  a  marked  increase  in  the  number  of  banks, 
because  the  profit  upon  circulation  was  large,  and  under 
meagre  laws  and  lax  supervision  the  liability  almost 
insignificant.  From  1837  to  1840  the  number  of  banks 
increased  113,  the  nominal  capital  $68,000,000;  by  1843 
the  resumption  of  coin  payments  had  become  quite 
general  and  the  number  had  diminished  210,  the  capi- 
tal $130,000,000.  Note-issues,  which  it  will  be  recalled 
aggregated  $149,000,000  in  1837,  now  amounted  to  less 
than  $59,000,000.  The  liquidation  had  reduced  the 
money  supply  per  capita  from  $13.87  to  $6.87;  needless 
to  add  that  the  number  of  failures  was  without  prece- 
dent in  the  country's  history.  The  estimate  of  losses 
during  the  period  was  nearly  $800,000,000. 

The  banks  which  were  founded  upon  a  flimsy  basis 
were  of  course  the  first  to  go  to  the  wall,  but  many 
which  had   been  properly  organized  also  suffered  ex- 
tinction.     The  catastrophe  was  so  general   and  wide-  Banking 
spread  that  the  subject  of  banking  reform  was  taken  up 

1  Messages  of  Presidents,  Vol.  IV. 


152  CONTEST  FOR  SOUND  MONEY 

seriously,  as  we  have  seen.  In  sixteen  of  the  states  the 
New  York  plan  of  free  banking  with  bond  deposit  to 
cover  circulation  and  the  double  liability  of  shareholders 
was  copied.  Quite  a  number  of  states  experimented  with 
banking  laws  that  had  been  tried  elsewhere  and  found 
wanting  and  with  schemes  which  had  never  been  tried. 
Review  of  the  Regarding  only  the  safety  of  the  federal  revenues,  in 
period.  v-ew  Q£  tjie  concjition  of  the  banks  and  their  currency, 

the  subtreasury  act  was  a  proper  measure.  It  served 
its  purpose  so  well  during  this  period  only  because  con- 
ditions were  exceptionally  favorable.  Secretary  Walker 
claimed  for  it  the  credit  of  having  caused  the  $22,000,000 
net  import  of  specie  in  1847  to  be  put  into  circulation 
instead  of  being  used  by  the  banks,  as  formerly,  to  in- 
flate their  note-issues.1  In  fact,  however,  when  the 
bank  reports  were  published  later,  it  appeared  that  the 
banks  had  absorbed  fully  one-half  of  this  coin  and  in- 
creased their  circulation  by  $23,000,000.  Indeed,  the 
financial  transactions  of  the  government  for  a  number 
of  years  after  1846  were  relatively  so  insignificant  in 
volume  that  the  question  whether  upon  the  whole  the 
"  constitutional  treasury "  was  detrimental  or  not  was 
subjected  to  no  real  test.  President  Taylor  in  his  first 
message  (1849)  gave  the  subject  only  three  lines,  leav- 
ing it  to  the  wisdom  of  Congress  to  retain  or  repeal  the 
law,  and  Congress  took  no  action. 

It  is  worthy  of  note  that  Congress  had  devised  no 
method  of  ridding  the  people  of  depreciated  paper;  not 
even  the  small  bills  (under  $5)  against  which  so  much 
had  been  said  were  done  away  with. 
Banking  Reference  has  been  made  in  previous  chapters  to  the 

sections^  dissatisfaction  of  the  Southern  and  Western  states  due 
to  the  disadvantage  under  which  they  labored  owing  to 
inadequate  banking  facilities.    The  following  table  gives 

1  Finance  Report,  1847. 


THE  PAPER   CURRENCY 


153 


for  the  several  sections  the  banking  power,  composed 
of  capital,  circulation,  and  deposits  of  reporting  institu- 
tions, and  the  relative  amount  per  capita  (excluding 
slaves  in  the  Southern  states). 


Banking  Power 
(In  Millions) 

Per  Capita 

1830 

1840 

1850 

1830 

1840 

1850 

New  England   .     .     . 

Middle 

Southern      .... 

54 

IO7 

80 

7 

89 

131 
196 

38 

114 

185 
117 

35 

$  27.66 

25.87 

15-54 

4-47 

#39.98 
25.64 

48.75 
11.29 

#41-89 
27-95 
22.28 

6-35 

Total    .... 

248 

454 

45  * 

»9-33 

26.64 

1947 

Note.  —  For  1830  the  figures  include  the  Bank  of  the  United  States  dis- 
tributed according  to  branches,  but  omitting  $14,000,000  of  capital  invested 
in  United  States  bonds. 

The  table  illustrates  not  only  the  disparity  referred 
to,  particularly  in  the  Western  states,  but  also  the  loca- 
tion of  the  enormous  expansion  in  1840. 

STATISTICAL   RESUME 

(Amounts  in  millions  of  dollars) 

Condition  of  Banks,  1837  to  1849 


Year 

No. 

Capital 

Circulation 

Deposits 

Specie 

Loans 

1837 

788 

291 

149 

I27 

38 

525 

1838 

829 

318 

Il6 

85 

35 

486 

1839 

840 

327 

135 

90 

45 

492 

1840 

901 

358 

107 

76 

33 

463 

1841 

784 

3H 

107 

65 

35 

386 

1842 

692 

260 

84 

62 

28 

324 

1843 

691 

229 

59 

56 

34 

255 

1844 

696 

211 

75 

85 

50 

265 

1845 

707 

206 

90 

88 

44 

289 

1846 

707 

197 

106 

97 

42 

312 

1847 

715 

203 

106 

92 

35 

310 

1848 

751 

205 

129 

103 

46 

344 

1849 

782 

207 

"5 

91 

44 

332 

1 54  CONTEST  FOR  SOUND  MONEY 

The  State  Bank  of  Indiana 


Year 

Loans 

Specie 

Other  Assets 

Notes 

Deposits 

Capital 

Surplus 

1835 

1.8 

0.8 

1.9 

»-5 

0.4 

1.2 

— 

1838 

4.2 

i-3 

I.I 

3-o 

0.4 

2.2 

0.3 

1 841 

4-7 

1.1 

1.0 

3-i 

0.3 

2.7 

0.3 

1844 

3-5 

1.1 

1.4 

3-i 

0-3 

2.1 

o-3 

1847 

3-8 

1.1 

2.1 

3-6 

0.6 

2.1 

°-5 

1850 

4.4 

1.2 

i-5 

34 

0.6 

2.1 

0.8 

1853 

5-i 

i-3 

i-5 

3-8 

0.7 

2.1 

1.0 

1856 

5-° 

1.1 

i-9 

34 

0.6 

2.1 

i-3 

Loans  include  advances  to  the  state  and  bonds. 


Circulation  1837  to  1849 


Year 

Bank- 
notes Out- 
standing 

Specie 
in  U.S. 

Total 

Money  in 

U.S. 

Specie  in 
Treasury 

Money  in 
Circu- 
lation 

Popula- 
tion 

Per 

Capita 

1837 

149 

73 

222 

5 

217 

'5-7 

$13-87 

1838 

116 

88 

204 

5 

199 

16.1 

12-33 

1839 

135 

87 

222 

2 

220 

16.6 

13.26 

1840 

107 

83 

I90 

4 

186 

17.1 

IO.91 

1841 

107 

80 

187 

1 

186 

17.6 

IO.59 

1842 

84 

80 

164 

— 

164 

18.1 

9.02 

1843 

59 

90 

149 

1 

147 

18.7 

7.87 

1844 

75 

IOO 

175 

8 

167 

19-3 

8.68 

1845 

90 

96 

186 

8 

178 

19.9 

8-95 

1846 

106 

97 

203 

9 

193 

20.5 

943 

1847 

106 

120 

226 

2 

224 

21. 1 

10.59 

1848 

129 

112 

241 

8 

232 

21.8 

10.66 

1849 

"5 

120 

235 

2 

233 

22.5 

10.34 

CHAPTER   VII 

1850  TO   l86l 

The  element  of  federal  politics  incident  to  the  com- 
petition for  public  deposits  having  now  been  definitely 
eliminated  from  the  banking  business,  commercial  bank- 
ing developed  in  a  greater  degree  than  ever  before. 
Issuing  currency,  instead  of  being  the  primary  object 
of  banking,  began  to  be  regarded  as  of  less  importance 
in  most  of  the  older  sections  of  the  country. 

The  distressing  experiences  already  described  pro-  improve- 
duced  a  revulsion  of  sentiment  in  some  of  the  states  banks" StatC 
which  led  to  the  severest  restrictions  upon  all  banks  by 
legislation  and  in  a  few  by  constitutional  amendment. 
Nine  states  had  no  banks  in  1852.1  After  a  few  years 
this  rigidity  relaxed  and  local  bank-note  issues  were 
again  reported  from  nearly  all  of  the  states.  The 
scarcity  of  silver  coin,  discussed  in  another  chapter, 
had  caused  a  large  increase  in  small  note-issues. 

Many  states  adopted  the  New  York  free  banking  and 
bond  deposit  plan,  but  not  without  modifications  that 
operated  more  or  less  to  neutralize  its  beneficial  features. 
Bonds  of  states  that  afterwards  depreciated,  railway 
bonds  some  of  which  proved  of  little  value,  and  mis- 
cellaneous securities,  were  permitted  to  be  used,  entail- 
ing losses  upon  the  note  holders.  Many  banks  reported 
no  deposits  and  no  specie,  the  bonds  deposited  to  secure 
circulation  being  all  the  protection  note  holders  could 
expect. 

1  Sumner,  History  of  Hanking  in  United  States. 
>55 


156  CONTEST  FOR  SOUND  MONEY 

The  publication  of  reports  of  condition,  now  required 
by  law  in  many  states,  no  doubt  assisted  in  correcting 
many  evils  and  removed  much  of  the  mystery  which  had 
surrounded  the  business. 
Greater  jn    New   England   compulsory   specie   reserve   laws 

were  enacted,  and  the  Suffolk  system,  supplemented  by 
other  wise  legislation,  served  to  maintain  prompt  re- 
demption and  a  safe  bank  currency,  acceptable  almost 
everywhere  in  the  Union.  In  1858  the  Suffolk  Bank 
made  over  that  special  business  to  the  Bank  of  Mutual 
Redemption,  organized  for  the  purpose  by  country 
banks.  In  1856  the  Boston  Clearing-house  was  estab- 
lished, following  the  lead  of  New  York  City,  where  a 
similar  institution  was  organized  three  years  earlier. 

The  New  York  State  Banking  Department  was  estab- 
lished in  1851.  The  Metropolitan  Bank  of  New  York 
City  was  established  to  act  as  a  central  redemption  bank 
(like  the  Suffolk)  in  the  same  year.  These  circumstances 
and  the  establishment  of  the  clearing-house  in  New 
York  City  in  1853  brought  about  a  much  more  stable 
and  secure  system  of  paper  currency. 
The  clearing-  In  the  metropolis  weekly  reports  were  required  to  be 
made  to  the  clearing-house  by  the  associated  banks, 
and  in  1858  a  fixed  ratio  of  cash  reserve  to  be  held 
against  deposit  liabilities  was  agreed  upon.  The  clear- 
ing of  checks  obviated  the  use  of  currency  to  a  con- 
siderable extent,  and  in  other  particulars  the  association 
of  the  banks  of  the  city,  voluntarily  imposing  restrictions 
upon  their  business,  contributed  greatly  to  make  them 
strong  and  influential. 

There  is  one  fundamental  principle  underlying  the 
clearing-house  system.  Each  bank  settles  its  daily  busi- 
ness with  all  the  other  banks  of  the  city  precisely  as  it 
would  if  there  were  but  one  other  bank  in  the  city. 
For  instance,  the  First  National  Bank  delivers  to  the 


house  sys- 
tem, 


THE  PAPER   CURRENCY  157 

clearing-house  at  ten  o'clock  a.m.  every  day  all  the  Its  opera- 
debit  items  it  holds  against  all  the  other  banks  and  re- 
ceives credit  for  the  amount  by  the  clearing-house.  The 
clearing-house  in  turn,  having  received  the  same  from 
the  other  banks,  delivers  to  the  First  National  all  the 
items  which  all  the  other  banks  of  the  city  hold  against 
it  and  debits  the  First  National  with  the  amount.  The 
First  National  is  either  debit  or  credit  according  to 
whether  the  amount  of  checks,  etc.,  it  brought  to  the 
clearing-house  exceeds  or  is  exceeded  by  the  amount  of 
checks,  etc.,  which  the  other  banks  brought  against  it, 
and  pays  or  receives  the  difference  or  balance  in  cash, 
as  the  case  may  be.  The  average  daily  exchanges  of  the 
New  York  banks  for  the  year  1902  were  $245,898,649 
and  the  average  cash  balances  were  $11,110,210.  The 
average  daily  use  of  money  was  lessened  by  the  clear- 
ing-house system  of  exchanges  $234,788,439,  being  the 
difference  between  the  cash  actually  used  and  the 
amount  of  the  checks  exchanged.  The  system  not  only 
minimized  the  use  of  actual  cash,  but  removed  the  risk 
involved  in  sending  so  much  cash  about  the  streets  and 
greatly  reduced  the  expense  involved  in  messengers, 
runners,  and  bookkeeping. 

The  making  of  the  settlement  at  the  clearing-house  in- 
volves only  about  forty-five  minutes  on  the  average.  The 
payment  of  debit  balances  is  made  at  a  bank's  con- 
venience any  time  prior  to  1.30  p.m.,  at  which  time  all 
credit  balances  are  paid. 

The  clearing-house  fixed  a  cash  reserve  and  bound  Reserves 
each  member  to  maintain  the  same  ;  took  the  public  into 
its  confidence  by  publishing  weekly  reports  of  condi- 
tion showing  the  standing  of  each  bank.  This  action, 
more  than  any  legislation,  more  than  anything  else, 
aided  in  building  up  a  sense  of  moral  responsibility  to 
the  public  on  the  part  of  banks  throughout  the  country, 


other  states. 


158  CONTEST  FOR  SOUND  MONEY 

in  restraining  the  undue  expansion  of  note-issues  and 
the  many  other  reprehensible  practices  which  char- 
acterized the  banking  of  that  period. 

Philadelphia  banks  organized  a  clearing-house  in 
1858.  Pennsylvania  enacted  a  redemption  law  similar 
to  that  of  New  York  and  also  prohibited  notes  under 
Action  in  $5.  The  latter  provision  was  likewise  embodied  in  the 
laws  of  Maryland,  Virginia,  Alabama,  Arkansas,  Louisi- 
ana, Kansas,  and  Missouri,1  one  of  the  objects  being  to 
enforce  the  use  of  silver  and  gold  in  the  smaller  trans- 
actions of  daily  barter.  It  failed  for  want  of  coopera- 
tion among  the  states.  A  similar  effort  failed  many 
years  later,  when  the  Treasury  tried  to  enforce  the 
general  circulation  of  the  silver  dollars  coined  under  the 
act  of  1878.     The  people  demanded  small  notes. 

Notwithstanding  the  strength  of  the  state  bank  of 
Indiana,  the  state  itself  was  for  a  time  the  favorite  place 
for  incubating  note-issuing  "  banks "  without  capital, 
banking  offices,  or  furniture.  A  circular  letter  issued 
offering  aid  to  any  one  desiring  to  start  such  a  bank 
stated  that  the  sole  cost  necessarily  incurred  in  starting 
a  $100,000  "bank"  would  be  $5000  for  plates  to  print 
the  notes  and  expenses,  including  compensation  to  the 
promoter,  and  $5000  as  margin  to  carry  the  necessary 
bonds  to  be  deposited.2  The  owner  of  the  "  bank " 
could  as  well  reside  in  New  York  as  Indiana. 

A  notable  instance  of  the  opposite  extreme  was 
"  George  Smith's  money."  These  notes  were  issued  by 
the  Wisconsin  Marine  and  Fire  Insurance  Company, 
which  was  controlled  by  George  Smith.  The  company 
clearly  had  no  right  to  issue  circulating  notes,  but  the 
notes  were  convertible  into  specie  at  all  times  with  such 
absolute  certainty  that  they  passed  at  par  everywhere, 

1  Sumner,  History  of  Banking  in  United  States. 

2  Hunt's  Merchant's  Magazine,  Vol.  XXXVIII.,  p.  261. 


THE  PAPER    CURRENCY 


I  59 


and  for  years  constituted  the  best  currency  in  the 
Northwest.1 

It  was  necessary  to  exercise  great  discrimination  as  to  Bank-note 

•  detectors 

the  notes  of  certain  sections  and  certain  banks,  which 
were  at  a  discount  of  from  one  to  fifty  per  cent.  In 
order  to  feel  assured  that  a  note  when  tendered  was 
good,  one  of  the  numerous  "bank-note  detectors"  had 
to  be  consulted,  and  it  was  exceedingly  difficult  for  those 
weekly  publications  to  keep  pace  with  the  brisk  "  bank 
starter"  and  "note  issuer."  Says  Sumner  in  his  History 
of  Banking :  — 


"The  bank-note  detector  did  not  become  divested  of  its 
useful  but  contemptible  function  until  the  national  bank  system 
was  founded.  It  is  difficult  for  the  modern  student  to  realize 
that  there  were  hundreds  of  banks  whose  notes  circulated  in 
any  given  community.  The  bank-notes  were  bits  of  paper 
recognizable  as  a  species  by  shape,  color,  size  and  engraved 
work.  Any  piece  of  paper  which  had  these  came  with  the 
prestige  of  money ;  the  only  thing  in  the  shape  of  money  to 
which  the  people  were  accustomed.  The  person  to  whom  one 
of  them  was  offered,  if  unskilled  in  trade  and  banking,  had  little 
choice  but  to  take  it.  A  merchant  turned  to  his  "  detector." 
He  scrutinized  the  worn  and  dirty  scrap  for  two  or  three  min- 
utes, regarding  it  as  more  probably  "  good  "  if  it  was  worn  and 
dirty  than  if  it  was  clean,  because  those  features  were  proof  of 
long  and  successful  circulation.  He  turned  it  up  to  the  light 
and  looked  through  it,  because  it  was  the  custom  of  the  banks 
to  file  the  notes  on  slender  pins  which  made  holes  through 
them.  If  there  were  many  such  holes  the  note  had  been  often 
in  bank  and  its  genuineness  was  ratified.  All  the  delay  and 
trouble  of  these  operations  were  so  much  deduction  from  the 
character  of  the  notes  as  current  cash.  A  community  forced 
to  do  its  business  in  that  way  had  no  money.  It  was  deprived 
of  the  advantages  of  money.  We  would  expect  that  a  free, 
self-governing,  and,  at  times,  obstreperous,  people  would  have 
refused  and  rejected  these  notes  with  scorn,  and  would  have 


Disreputable 

condition 

currency. 


1  White,  Money  and  Banking. 


i6o 


CONTEST  FOR  SOUND  MONEY 


made  their  circulation  impossible,  but  the  American  people  did 
not.  They  treated  the  system  with  toleration  and  respect.  A 
parallel  to  the  state  of  things  which  existed,  even  in  New 
England,  will  be  sought  in  vain  in  the  history  of  currency." 

The  following  statement  illustrates  the  condition  of 
the  currency  from  the  detector's  point  of  view  :  — 


1856 

1862 

Number  whose  notes  were  not  counterfeited  . 

1409 

463 

1462 

11 19 

224 

1500 

253 
1861 

3039 
1685 

General  con- 
dition of 
banks. 


This  does  not  include  notes  in  circulation  of  suspended 
banks,  whose  value  was  so  doubtful  pending  liquidation 
that  the  discounts  thereon  were  always  heavy. 

An  examination  of  the  reports  of  the  banks  indicates 
that  upon  the  whole  the  general  business  was  regulated 
in  greater  measure  by  the  demands  of  trade  and  less  by 
speculative  ventures  than  in  any  previous  period.  The 
circulation  bore  a  fair  relation  to  the  specie,  and  deposits 
constituted  an  increasing  portion  of  the  amounts  loaned. 

The  great  weakness  of  the  banks  of  the  Western  states 
was  their  investments  in  "  stocks"  (securities  generally) ; 
fully  one-half  of  their  capital  was  so  invested,  whereas 
New  England  and  Middle  state  banks  showed  but  2  per 
cent. 

Owing  to  the  non-enforcement  of  laws  requiring  re- 
demption of  notes,  it  had  become  the  habit  of  bank  offi- 
cers and  others  to  regard  the  presentation  of  notes  for 
redemption  in  specie  as  an  act  to  be  reprobated,  mani- 
festing a  desire  to  injure  the  bank  and  through  it  the 
community  where  it  was  located. 


THE  PAPER   CURRENCY  161 

As  has  been  stated,  the  operation  of  the  subtreasury  influence  of 

,,.,._.  ,  ,  subtreasury. 

act  exerted  little  influence  upon  the  currency  so  long  as 
the  federal  revenues  were  not  largely  in  excess  of  expen- 
ditures. Repeatedly  the  secretaries  of  the  Treasury 
reported  that  no  disturbance  had  been  experienced  — 
indicating  that  the  fear  that  such  an  event  might  occur 
was  lurking  in  their  minds. 

In  i853~i854the  surplus  revenue  assumed  consider- 
able proportions,  and  Secretary  Guthrie  found  it  advisable 
to  use  it  to  relieve  stringencies  in  the  money  market  by  the 
purchase  of  bonds  at  extraordinary  premiums.1  On  one 
occasion  he  paid  as  high  as  21  per  cent  premium.  He 
did  not  hesitate  to  say  that  he  regarded  it  necessary  to 
avert  a  panic,  and  he  repeated  the  operation  on  several 
other  occasions  for  the  same  reason. 

Guthrie  gave  the  subject  of  the  currency  much  atten- 
tion during  his  administration  of  the  Treasury  (185  3- 1 857). 

In  1855  2  he  reviewed  the  history  of  banks  from  1790.  Guthrie's 
He  expressed  himself  in  no  uncertain  language  upon  the 
laxity  of  the  state  governments  in  failing  to  properly 
regulate  the  note-issues,  and  especially,  to  abrogate  the 
use  of  small  denominations.  Like  his  predecessors  of 
the  Jackson  school,  however,  he  saw  no  way  to  coerce  the 
states  or  the  banks  :  several  judicial  decisions  (the  Bris- 
coe case  already  referred  to  and  the  case  of  Darrington 
vs.  Bank  of  Alabama,  13  How.  12)  had  settled  the  ques- 
tion of  the  constitutionality  of  state  bank  issues,  and  he 
regarded  it  too  late  then  (185 5)  to  have  the  courts  retrace 
their  steps,  nor  could  he  hope  for  the  cooperation  of  the 
states,  influenced  as  they  were  by  local  interests.  He 
said,  however,  that  if  the  states  continued  this  policy 
Congress  would  be  justified  in  levying  a  tax  on  the  notes 
that  would  in  effect  abrogate  the  power. 

1  Finance  Reports,  1853  and  1854. 

2  Finance  Report,  1855. 


views. 


1 62  CONTEST  FOR  SOUND  MONEY 

Guthrie  on  In  his  last  report  ( 1856),  however,  Guthrie  confessed 

notes. a"  tnat  a  purely  specie  currency  was  out  of  the  question  ; 
he  estimated  the  volume  of  small  notes  ($$  and  under) 
at  $50,000,000,  but  regarded  it  premature  to  tax  them 
out  of  existence,  recommending  a  constitutional  amend- 
ment giving  Congress  the  power  to  regulate  these  issues. 
He  added :  — 

"  At  present,  an  attempt  to  prohibit  and  restrain  the  issue 
and  circulation  of  small  notes,  by  a  resort  to  taxation,  or  by 
applying  bankrupt  laws  to  these  corporations,  would  be  prema- 
ture. In  my  former  reports  the  subject  has  been  brought  to 
the  attention  of  Congress,  with  a  view  to  the  full  consideration 
of  the  evil  and  danger  to  our  currency,  from  their  continued 
use,  under  the  hope  that  Congress  or  the  states  authorizing 
their  issues,  would  take  action,  to  extend  the  restriction  and 
make  it  general. 

"If  the  small  notes  are  withdrawn  and  prohibited,  it  is  believed 
the  operations  of  the  Treasury,  in  the  collection  and  disburse- 
ment of  the  national  revenue,  would  be  as  salutary  a  restraint 
upon  the  banks  and  upon  commercial  transactions  as  could  be 
interposed,  and  all-sufficient  to  secure  as  sound,  healthy,  and 
uniform  a  currency  as  it  is  practicable  to  have." 

The  Treasury  at  this  time  held  $30,000,000,  in  coin, 
surplus. 
Subtreasury  In  order  to  save  the  expense  of  transferring  specie 
extended  from  depositories  where  it  accumulated  beyond  the 
local  needs,  the  Treasury  entered  upon  the  business  of 
selling  drafts,  thus  assuming  the  function  of  dealing  in 
domestic  exchange,  which  had  been  regarded  so  per- 
nicious when  done  by  the  Bank  of  the  United  States. 

Disbursing  officers  of  the  government,  to  whom  large 
sums  were  from  time  to  time  advanced,  continued  to 
deposit  these  funds  in  the  banks  until  an  act  of  1857 
(repeatedly  asked  for  by  every  Secretary  of  the  Treas- 
ury since  1846)  compelled  the  deposit  in  the  subtreas- 


THE  PAPER   CURRENCY 


163 


uries,  the  payment  to  be  made  by  checks  instead  of  by 
cash,  —  another  departure  from  the  original  plan. 

The  banks  had  during  the  period  prior  to  1857  be-  inflation  of 
come  heavily  interested  in  railway  construction  which  at  secuntiei 
this  time  assumed  very  extensive  proportions.  So  large 
a  part  of  their  means  was  tied  up  in  this  relatively 
permanent  form  of  investment,  that  they  felt  it  impossi- 
ble in  the  summer  and  fall  of  1857  to  satisfy  the  demand 
for  commercial  discounts.  Rates  of  interest  became  ex- 
orbitant The  troubles  began  in  August  and  became 
quite  general  by  October,  when  the  New  York  City 
banks,  except  the  Chemical,  suspended  specie  payments,  Suspension 
followed  generally  by  all  the  banks  in  the  country  except- 
ing South  Carolina,  Louisiana,  the  state  banks  of  Ohio 
and  Indiana,  and  a  few  others. 

New  York  City  was  and  had  been  for  years  the 
actual  monetary  centre  of  the  country ;  its  banking 
capital  had  steadily  grown  from  $20,000,000  in  1840  to 
$25,400,000  in  1849,  $35,500,000  in  1852,  $55,000,000 
in  1856,  and  $65,000,000  in  1857.  The  associated  banks 
of  the  metropolis  were  looked  to  for  leadership. 

It  is  therefore  of  special  interest  to  note  their  condi- 
tion during  the  year  of  the  crisis.  The  specie  in  the 
New  York  subtreasury  is  also  given  in  the  following 
table x  (in  millions  of  dollars) :  — 


of  1857. 


New  York 
City  banks 
in  1857. 


Date 


Capital 


Loans 


Specie 


Circu- 
lation 


Deposits 


Sub- 
treasury 


Jan.  3 
April  11 
Aug.  I 
Oct.  3 
Dec.  5 


55-2 

59-5 
64.6 
65.0 
63-5 


109. 1 

"5-4 

120.6 

105.9 

96-3 


11. 2 
10.9 
12.9 
11.4 
26.1 


8.6 
8.8 
8.7 

7-9 
6.6 


95-8 
96-5 
94.6 
68.0 
78-5 


11.4 
15.2 
12.2 

7-7 
4.0 


Compiled  from  Hunt's  Merchant's  Magazine. 


1 64  CONTEST  FOR  SOUND  MONEY 

The  loans  had  reached  a  minimum  of  $95,000,000  on 
November  28,  the  deposits  of  $53,000,000  and  specie 
$7,800,000  on  October  17. 

The  tremendous  increase  in  railway  construction, 
especially  in  the  Central  and  Western  states,  was  the  most 
important  factor  in  bringing  about  the  stringency  of  1854 
and  finally  the  crisis  of  1857.  In  1850  there  were  9021 
miles  of  railway  in  operation,  in  1854,  16,726;  in  1857 
the  number  was  24,503 ;  this  represented  an  increase  of 
railway  securities  of  nearly  $600,000,000,  more  than 
half  of  which  was  issued  in  1 854-1 857. 

For  the  seven  years  the  country's  imports  exceeded 
the  exports  over  $300,000,000,  and  all  but  $50,000,000 
of  this  sum  was  covered  by  net  exports  of  specie.  The 
foreign  holdings  of  our  securities,  estimated  at  $261,000,- 
000  in  1852,  were  in  1857  placed  at  $400,000,000. 
Expansion  of  With  but  an  indifferent  foreign  market  for  the  large 
mass  of  securities  and  a  home  market  incapable  of 
absorbing  all  of  it,  the  banks  of  the  country  were  com- 
pelled to  carry  them  to  the  detriment  of  the  mercantile 
community.  So  in  1854  the  total  circulation  of  the 
banks  of  the  country  expanded  until  the  money  per 
capita  was  over  $16;  in  the  two  following  years  con- 
traction took  place,  but  in  1857  the  general  expansion 
was  in  even  greater  proportion.  (See  table  at  end 
of  chapter.) 

The  New  York  City  banks  were  subjected  to  a  steady 
drain  of  specie  by  the  subtreasury  (which  was,  owing  to 
the  large  importations,  collecting  heavy  revenues)  and 
pressed  for  loans.  They  had  expanded  their  credits 
until  they  thought  they  had  reached  the  limit  of  pru- 
dence in  August,  and  began  to  contract  existing  loans 
at  a  rapid  rate  and  refused  all  applications  for  new  ones, 
endeavoring  in  this  way  to  avoid  suspension  which  was 
prohibited  by  the  state  constitution.1 

1  Sumner,  History  of  Banking. 


circulation. 


THE  PAPER   CURRENCY  165 

A  desperate  struggle  ensued.  Notes  of  country- 
banks  were  rushed  for  redemption,  and  failure  to 
redeem  promptly  caused  reports  of  failures  of  such 
banks.  The  telegraph,  then  lately  come  into  general 
use,  spread  the  news  and  was  named  as  one  of  the 
"causes  of  the  crisis."  Bank  shares  which  had  been 
at  par  sold  under  40,  stocks  fell  from  10  to  40  per  cent,  "Treasury 
and  foreign  exchange  broke  more  than  10  per  cent 
without  bringing  in  specie.1  The  Treasury  had  begun 
early  in  the  year  to  buy  government  bonds  in  small 
amounts,  and  the  banks  were  disposed  to  look  to  it  for 
further  help.  Secretary  Howell  Cobb  increased  his 
purchases,  but  the  withdrawal  of  deposit  accounts 
which  were  reduced  over  $40,000,000  in  ten  weeks, 
thereby  greatly  diminishing  the  specie  fund,  finally 
caused  suspension  of  the  banks  October  14. 

It  should  be  noted  that  the  courts  decided  that  the 
constitutional  provision  against  suspension  was  not  ap- 
plicable so  long  as  a  bank  was  not  actually  insolvent.1 
The  suspension  was  only  for  a  short  time  against  the 
notes  of  the  banks.  They  had  suspended  paying  depos- 
its and  making  loans.  There  was  no  premium  on  gold. 
Speaking  of  the  great  withdrawal  of  deposits  the  Super- 
intendent of  the  Bank  Department  of  New  York  said : 

"The  great  concentrated  call  loan  was  demanded,  and  in 
such  amounts  that  a  single  day's  struggle  ended  the  battle  ;  and 
the  banks  went  down  before  a  storm  they  could  not  postpone 
or  resist.  .  .  .  The  most  sagacious  banker,  in  his  most  appre- 
hensive mood,  never  for  a  moment  deemed  it  possible  to  have 
a  general  suspension  in  this  state  from  a  home  demand  for  coin, 
while  coin  itself  was  at  little  or  no  premium  with  the  brokers." 2 

The  banks  in  the  Central  and  Western  states  being 
the  largest  holders  of  railway  securities  suffered  more 
than  those  of  the  South.  Indeed,  in  some  parts  of  the 
South  the  crisis  was  hardly  felt. 

1  Hunt's  Merchant's  Magazine,  Vol.  XXXVII.  2  Report,  1857. 


1 66  CONTEST  FOR  SOUND  MONEY 

Resumption.  After  suspension  in  New  York  the  Treasury  continued 
to  buy  bonds,  gold  arrived  from  California  and  from 
abroad,  and  on  the  12th  of  December  the  banks  were 
able  to  resume.  Other  Eastern  banks  did  so  early  in 
1858,  Western  and  Southern  banks  delayed  much  longer. 
Over  5100  failures  with  liabilities  of  nearly  $300,000,- 
000  were  recorded.  Prices  of  stocks,  breadstuffs,  and 
other  commodities  fell  ruinously,  imports  diminished 
immediately,  many  cargoes  being  returned  without  land- 
ing. The  exchanges  at  the  New  York  clearing-house 
diminished  43  per  cent. 
Says  Sumner:  — 

"The  suspension  was  preceded  by  a  desperate  struggle 
between  all  the  banks  themselves,  and  distrust  and  fear  of  cur- 
rency was  more  apparent  among  them  than  with  the  public 
generally.  The  banks  began  a  savage  contraction,  being  in  no 
position  whatever  to  meet  the  crisis  by  bold  loans  to  solvent 
borrowers.  It  was  afterwards  said,  with  great  good  reason,  that 
the  panic  was  entirely  unnecessary  and  need  not  have  occurred, 
but  the  banks  put  all  the  pressure  on  their  loans  to  merchants 
because  they  could  not  recall  those  to  the  railroads." 1 

Buchanan  President  Buchanan  and  Secretary  Cobb  were  most 

utt'icks  st'itc 

banks.  severe  in  their  denunciation  of  the  banks.     The  former 

in  his  message2  said  that  such  revulsions  must  occur 
when  1400  irresponsible  institutions  are  permitted  to 
usurp  the  power  of  providing  currency,  thus  affecting 
the  value  of  the  property  of  every  citizen ;  this  power 
should  never  have  been  dissevered  from  the  money- 
coining  power  exclusively  conferred  upon  the  federal 
government.  Unfortunately,  as  it  was,  nothing  could 
be  done ;  a  national  bank,  even  if  constitutional,  would 
not  serve,  as  was  shown  by  the  history  of  the  second 
bank.  Referring  to  the  existing  systems  he  pointed 
out  that  only  in  one  state,  Louisiana,  were   banks  re- 

1  History  of  Banking  in  United  States. 

2  Messages  of  Presidents,  Vol.  V. 


THE  PAPER   CURRENCY  167 

quired  to  keep  adequate  specie  reserves;  according  to 
the  standard  adopted  by  Louisiana,  the  backs  should 
have  had  one  dollar  in  three  against  notes  and  deposits, 
whereas  they  had  only  $58,000,000  of  specie  against 
$445,000,000  of  those  obligations,  considerably  less  than 
one  in  seven.  Slight  pressure  for  cash  thus  inevitably 
brought  failure.  He  favored  a  compulsory  bankrupt 
law  for  banks  failing  to  meet  their  obligations,  and  even 
suggested  depriving  banks  of  the  note-issuing  power 
altogether. 

Cobb  insisted  that  the  disbursements  of  specie  by  the 
subtreasuries  had  aided  in  restoring  coin  payments,  and 
contrasted  the  conditions  with  those  of  1837.  He 
thought  so  well  of  the  independent  treasury  that  he 
urged  the  several  states  to  adopt  the  same  system  for 
their  own  affairs.1     Ohio  actually  did  so  in  1858. 

The  Treasury  suffered  in  its  revenue  by  the  diminished  Treasury 
imports,  and  the  act  of  December  23,  1857,  authorized 
covering  the  deficit  by  the  issue  of  $20,000,000  in  6 
per  cent  one-year  Treasury  notes.  In  June,  1858,  the 
Treasury  was  authorized  to  issue  a  fifteen-year  5  per 
cent  loan  for  $20,000,000.  In  1859  authority  was  given 
to  reissue  the  Treasury  notes  of  1857,  and  the  amount 
used,  including  reissues,  was  $52,778,900.  Most  of 
them  actually  remained  out  until  i860.  Thus  the  people 
suffered  from  taxation  in  addition  to  their  losses  on 
account  of  the  ill-regulated  currency  system. 

The  aggregate  bank  returns  for  1858  showed  a  con- 
traction of  deposits  and  circulation  from  $445,000,000 
to  $340,000,000  and  an  increase  of  specie  to  $74,000,000. 
Loans  were  diminished  fully  $100,000,000,  of  which 
$43,000,000  occurred  in  the  banks  of  New  York  State 
alone.  The  banks  of  the  latter  state  were  also  credited 
with  almost  the  entire  specie  increase  for  that  year. 

1  Finance  Report,  1857. 


1 68 


CONTEST  FOR  SOUND  MONEY 


At  the  end  of  this  period  (1861)  the  number  of  banks 
had  increased  to  1601,  their  capital  to  $697,000,000; 
circulation  had  again  gone  beyond  the  $200,000,000 
point,  and  deposits  to  $257,000,000.  Against  the  total 
of  these  obligations  of  $460,000,000  they  had  nearly 
$88,000,000  specie,  or  nearly  one  dollar  in  five. 

The  following  table  shows  the  distribution  by  sections 
and  for  certain  states,  of  the  deposits,  circulation,  and 
specie  in  millions,  and  the  relation  of  specie  holdings 
to  circulation  and  deposits,  in  1861  :  — 


States 

Deposits 

ClRCULA- 

Specie 

Specie 
to  Notes. 

Specie 
to  Both. 

Per  Cent 

Per  Cent 

New  England 

41.9 

33-i 

10.4 

3i-4 

13-8 

Massachusetts 

34- 0 

19-5 

8.8 

45-  > 

16.4 

Middle  .... 

152.0 

53-4 

39-o 

73-o 

18.9 

New  York  .     . 

114.8 

28.2 

26.4 

93-6 

27.2 

Southern   . 

42-5 

61.9 

30.2 

48.8 

29.0 

Louisiana  . 

17.1 

6.9 

13-7 

198.5 

57-o 

Western     . 

15.8 

38.2 

9.6 

25.0 

17.7 

United  States 

257.2 

202.0 

87.7 

43-8 

19.2 

The  Louisiana  system  thus  appeared  in  the  front  rank 
as  far  as  security  was  concerned.  New  York  and  the 
Middle  states,  as  well  as  the  Southern  states,  reported 
conditions  superior  to  those  of  New  England.  Indeed 
it  was  only  after  the  crisis  that  the  banks  in  the  latter 
section  were  led  to  increase  their  specie.  In  prior  years 
the  specie  of  New  England  banks  was  usually  less  than 
13  per  cent  on  their  circulation. 

In  i860  and  early  in  1861  the  deficits  in  the  revenue 
again  compelled  the  Treasury  to  resort  to  loans  and 
Treasury  notes  which  were  negotiated  at  a  discount. 
This  latter  circumstance  was  due  to  the  impending  civil 
war  and  not  to  currency  conditions.  The  amount 
authorized  was  $20,000,000;  including  reissues  the 
amount  used  was  $45,364,450. 


THE  PAPER   CURRENCY 


169 


The  sectional  disparity  in  banking  and  currency  facil- 
ities largely  disappeared  during  this  period,  the  Southern 
states  having  been  fairly  well  supplied,  as  the  following 
table  shows.  (As  before,  the  slave  population  is  excluded 
in  reaching  a  per  capita.) 


States 

Banking  Power 
(in  Millions) 

Per  Capita 

1850 

i860 

1850 

i860 

Eastern 
Middle .     .     . 
Southern    . 
Western     . 
United  States 

114 

185 
117 

35 
452 

209 

37i 
223 

83 
886 

#41-39 

27.95 
22.28 

6-35 
19.47 

$66.89 

44-35 

33-69 

8.52 

27.98 

Banking 
power  by 
sections. 


The  conditions  existing  from  1850  to  1861  were  truly 
anomalous.  The  currency  systems  of  the  several  states 
were  as  a  rule  based  upon  laws  which  on  their  face  were 
fairly  complete  and  conservative.  In  the  aggregate,  so 
far  as  the  reports  enable  one  to  determine,  the  condi- 
tions were  not  radically  unsound,  and  yet,  owing  to  want 
of  supervision  and  non-enforcement  of  the  laws,  they 
furnished  the  country  a  paper  currency  in  large  part  so 
disreputable  as  to  cause  amazement  that  the  people 
tolerated  the  same  and  endured  the  robbery  which  was 
thereby  imposed  upon  them.  Refusal  to  redeem  notes 
was  in  most  states  an  infraction  of  the  law,  to  be  fol- 
lowed by  the  forfeiture  of  the  charter  of  the  offending 
bank,  and  yet  the  law  was  habitually  disregarded. 

Banking  conditions  for  the  whole  period  of  national   General 

review 

existence  prior  to  the  Civil  War  may  be  classified  as 
follows :  — 

1.  First  United  States  Bank  (1791-1811).  Sound 
bank  currency. 

2.  Interval  (1812-18 16).  State  bank  currency  infla- 
tion, suspension,  disasters  involving  enormous  losses. 


170  CON  1  EST  FOR  SOUND  MONEY 

3.  Second  United  States  Bank  (18 1 7-1 836).  At  first 
unsettled  conditions  as  to  currency  and  business,  then 
sound  paper  currency  by  reason  of  United  States  Bank 
enforcing  redemption  of  state  bank-notes  and  formulating 
a  standard  of  credit  to  which  the  state  banks  in  compe- 
tition were  obliged  to  conform ;  then  during  last  years 
of  its  existence  unsettled  conditions  owing  to  political 
power  exerted  to  prevent  renewal  of  bank's  charter. 

4.  1 837-1 846.  Inordinate  inflation,  suspension,  and 
losses  measured  by  the  hundred  millions,  withdrawal 
of  government  funds  from  the  banks,  with  the  declared 
hope  of  preventing  undue  expansion  of  bank-note  issues 
by  so  doing. 

5.  1847-1860.  Banking  becoming  more  conservative ; 
deposits  counting  more  and  note-issues  less  as  a  means 
of  extending  credit;  note-issues,  however,  unrestrained 
and  entailing  enormous  losses  upon  the  people ;  failure 
of  subtreasury  to  restrain  or  control  banking  methods, 
but  disastrously  interfering  with  business  by  withdrawing 
from  the  channels  of  trade,  and  locking  up,  funds  which 
should  be  current. 

Central  bank  It  is  notable  that  only  during  the  existence  of  a  cen- 
freasurT  tra*  ^an^  ^id  the  country  enjoy  for  extended  periods  a 
systems  currency  that  could  be  regarded  as  sound,  with  domestic 

ampare  .  exchange  reasonably  well  regulated,  and  discount  rates 
fairly  equitable  in  different  sections.  So  long  as  the 
bank  was  limited  in  its  charge  for  discounts  by  its  char- 
ter, local  banks  were  necessarily  influenced  in  adjusting 
their  rates ;  so  long  as  the  bank  through  its  branches 
furnished  exchange  at  rates  which  were  not  an  exorbitant 
tax  upon  trade,  other  banks  had  to  do  the  same ;  and  so 
long  as  the  bank  enforced  redemption  of  notes  and  ac- 
cepted only  those  convertible  into  specie  for  payments  to 
the  Treasury,  the  local  banks  could  not  inflate  their  issues 
and  found  it  profitable  to  maintain  convertibility. 


THE  PAPER   CURRENCY 


171 


The  Jacksonian  Democrats,  in  contradistinction  from 
Gallatin,  Dallas,  Crawford,  and  others,  having  taken 
position  against  the  central  bank  system,  and  having 
by  fortuitous  circumstances  maintained  control  of  legis- 
lation for  a  long  period,  conceived  the  idea  that  currency 
and  business  evils  could  be  regulated  by  the  subtreasury 
system.  Although  they  suffered  defeat  at  the  polls  in 
1840,  their  plans  were  materially  aided  by  Tyler's  weak- 
ness and  virtual  desertion  of  his  party  and  the  consequent 
failure  to  establish  a  central  bank.  In  the  meantime 
the  judicial  department  of  the  government  had  declared 
that  the  state  bank  issues  were  constitutional.  Thus  the 
subtreasury  act  came  into  popular  favor  and  became 
law.     At  its  best  it  was  only  a  partial  remedy. 

It  may  be  of  interest  to  insert  here  a  criticism  of  the 
subtreasury  system  in  1902,  after  fifty  years'  experience, 
by  ex-Comptroller  of  the  Currency  James  H.  Eckels : — 

"  The  government  in  its  Treasury  Department  by  force  of  law  Eckels  on 
undertakes  to  be  a  bank,  but  the  futility  of  the  undertaking  t] 
becomes  manifest  when  it  is  known  that  it  is  founded  upon 
no  banking  principles  and  conducted  in  accordance  with  no 
recognized  banking  rules.  In  its  subtreasury  system  it  is  the 
bank  of  the  mere  safety  deposit  vault  or  the  stocking  of  the 
ignorant  and  suspicious  citizen,  who  needs  must  have  within 
his  grasp  always  the  actual  money,  who  has  no  faith  in  credit 
and  who  refuses  to  contribute  anything  to  maintaining  the 
affairs  of  a  business  world  carried  on  and  enlarged  by  the 
instruments  of  credit.  Into  this  government  safety  box  each 
day  are  being  lodged  vast  sums  of  money  taken  out  of  the 
channels  of  trade  and  commerce  at  a  time  when  most  needed, 
there  to  lie  in  wasteful  idleness  to  the  profit  of  none  but  to  the 
loss  of  all.  By  such  a  system  every  business  man  is  made  to 
pause  daily  to  consider  how  far  he  may  expand,  to  what  extent 
he  must  retrench,  for  all  his  dealings  ultimately  are  so  affected 
by  the  amount  of  money  the  government  is  withdrawing  from 
the  needs  of  the  business  world ;  and  thus  whether  he  wills  or 


treasury. 


172  CONTEST  FOR  SOUND  MONEY 

not,  the  government  is  his  partner  and  the  government's  acts 
control  his  own. 
Based  on  "There  can  be  no  Secretary  of  the  Treasury,  no  matter  how 

ase  eones.  wjje  j^g  experience  or  acute  his  financial  perception,  who  can 
accomplish  more  than  a  temporary  makeshift  for  relief  with  the 
half-created  banking  system  which  makes  up  the  subtreasury 
—  an  institution  based  upon  false  theories  in  economics  and 
which  in  every  part  violates  correct  banking  methods  and  prin- 
ciples. If  the  safety  deposit  theory  of  banking  as  exemplified 
in  the  subtreasury  is  the  true  one  as  applicable  to  national 
government  fiscal  affairs,  it  should  prove  equally  essential  in 
the  governmental  finance  of  states,  counties,  cities,  and  villages, 
and  these  all  should  go  outside  the  banks  and  each  establish 
its  own  respective  strong  box  and  withdraw  still  more  of  the 
country's  currency  from  daily  business  life.  So,  too,  the  indi- 
vidual business  man  should  do  the  same,  for  there  can  be  no 
correct  rule  for  one  which  is  not  applicable  to  all  who  are 
engaged  in  any  business  which  requires  the  management  of 
money  and  credits,  whether  it  be  a  corporation  or  an  indi- 
vidual. If  all  in  business  received  deposits  only  to  hoard  them, 
soon  interchange  of  commodities  would  cease,  manufacturing 
come  to  a  standstill,  agricultural  interests  languish  and  trans- 
portation lines  grow  idle.  That  which  no  business  man  accepts 
as  a  correct  principle  in  his  own  undertakings  his  government 
enforces  to  the  wasting  of  his  own  and  his  fellows'  substance." 

Derelict  The  states  which  endeavored  by  the  enactment  of  the 

state  po  icy.  ^on(j  dep0Sjt  plan  to  remedy  the  currency  evil  imagined 
that  they  had  done  all  that  was  requisite,  but  in  the 
absence  of  compulsory  provision  for  reserves  and  re- 
demption, and  the  lax  enforcement  of  the  laws  which 
existed,  undue  expansion  was  not  prevented  and  illegiti- 
mate evasions  went  unpunished.  Van  Buren,  Tyler, 
and  Buchanan,  as  well  as  secretaries  of  the  Treasury 
during  the  period  after  1837,  saw  clearly  wherein  the 
states  were  derelict  and  appreciated  fully  the  extent  of 
the  legalized  misappropriation  of  the  people's  property 
resulting  therefrom.     Their  narrow  political  tenets,  how- 


THE  PAPER    CURRENCY  1 73 

ever,  rendered  them  blind  to  the  fact  that  Congress  had  Weak  fed- 
the  power  by  taxation  to  extirpate  the  evil  and  afford  the 
people  protection.  Their  shuffling  policies  are  well  illus- 
trated by  the  historic  enunciation  of  Buchanan  in  another 
instance  when  he  declared  that  the  states  had  no  right  to 
secede,  but  that  there  was  no  power  in  the  Constitution 
to  coerce  a  sovereign  state.  To  paraphrase,  the  state 
bank  systems  of  currency  were  almost  criminally  wrong 
and  unjust,  but  there  was  no  power  in  the  Constitution, 
ordained  though  it  was  "to  establish  justice,"  to  prevent 
the  wholesale  fraud  upon  the  people  which  the  lax  cur- 
rency systems  of  the  states  engendered.  The  Civil  War 
resulted  in  enfranchising  the  slaves.  It  also  liberated 
the  whole  people  from  evils  of  state  bank  currency. 

Respecting  the  several  issues  of  Treasury  notes  prior  Treasury 
to  the  Civil  War,  it  is  interesting  to  note  that  the  first 
emission  of  this  form  of  "bills  of  credit"  (18 12)  was 
made  during  the  administration  of  Madison,  and  although 
a  question  as  to  the  constitutionality  arose,  it  was  deter- 
mined in  favor  of  the  issue  both  by  Congress  and  the 
President.  It  was,  however,  held  beyond  the  power  of 
Congress  to  give  the  notes  the  legal  tender  function, 
but  they  were  made  receivable  for  all  public  dues. 
Later  issues  were  authorized  in  the  administration  of 
Van  Buren,  Tyler,  Polk,  and  Buchanan,  all  of  them 
"  strict  constructionists."  Both  Jefferson  and  Tyler 
favored  the  use  of  these  notes  as  currency,  and  when  they 
were  issued  in  small  denominations,  they  actually  became 
for  short  periods  a  part  of  the  circulation  of  the  country. 

Hamilton's  views  on  the  subject  were  expressed  in  his 
report  on  the  bank  plan,  as  follows :  "  The  emitting  of 
paper  money  by  authority  of  government  is  wisely  pro- 
hibited to  the  individual  states  by  the  Constitution,  and 
the  spirit  of  that  prohibition  ought  not  to  be  disregarded 
by  the  government  of  the  United  States." 


174 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 

(Amounts  in  millions  unless  otherwise  indicated) 

Circulation,  etc. 


-  u 

y  h 

>   h 

ffi  « 

< 
M 

>< 

Estimated 
Bank-notes 
outstandin 

ii 

S    Z 

PS 

w  5 

a  < 

K 

il 

O     H-. 

z 

5£ 

E  ,K 
c/3  H 

O    U 

K 
O 

P 
< 

K 
O 
fit 

g 

< 

u 

M 
i 
£ 

V    E>    S5 
O    *    H 

>  g  % 

S  -  i? 

H      K      Z 

l850 

131 

J54 

285 

7 

278 

23 

#12.02 



I85 1 

»55 

186 

34i 

11 

330 

24 

I376 

— 

1852 

172 

204 

376 

15 

361 

25 

I4.63 

— — 

1853 

188 

236 

424 

22 

402 

2b 

I5.80 

— 

1854 

205 

241 

446 

20 

426 

2b 

I6.IO 

5750 

1855 

187 

250 

437 

19 

418 

27 

'5-34 

5363 

1856 

196 

250 

446 

20 

426 

28 

15.16 

6906 

1857 

215 

260 

475 

18 

457 

29 

15.81 

8333 

1858 

J55 

260 

415 

6 

409 

30 

I3-78 

4757 

I859 

i93 

250 

443 

4 

439 

31 

14-35 

6448 

i860 

207 

253 

442 

7 

435 

31 

1385 

7231 

Bank  Statistics 


State  Banks 

Savings  Banks 

Year 

Number 

Number 

Capi- 
tal 

Circu- 
lation 

De- 
posits 

Specie 

Loans 

Stocks 

Deposits 

Deposi- 
tors 
(ooo's) 

Average 
Deposit 

1850 

824 

217 

131 

I IO 

45 

364 

21 

43 

251 

#173 

1851 

879 

228 

155 

129 

49 

414 

22 

5° 

277 

182 

1852 

— 

59 

309 

193 

1853 

750 

208 

I46 

I46 

47 

409 

22 

72 

366 

I98 

1854 

1208 

301 

205 

188 

59 

557 

44 

78 

396 

196 

1855 

1307 

332 

187 

I90 

54 

576 

53 

84 

432 

195 

1856 

1398 

344 

I96 

213 

59 

634 

49 

96 

488 

196 

1857 

1416 

371 

215 

230 

58 

684 

59 

99 

490 

20I 

1858 

1422 

395 

155 

186 

74 

583 

60 

108 

539 

20I 

1859 

1476 

402 

193 

260 

i°5 

657 

64 

129 

623 

207 

i860 

1562 

422 

207 

254 

84 

692 

70 

149 

694 

215 

No  returns  for  1852.     1853  very  imperfect. 


PART   TWO 
PERIOD    FROM    1861    to    1890 


I.   THE    UNITED   STATES    LEGAL 
TENDER   NOTES 

CHAPTER   VIII 
1861  to  1865 

The  financial  and  monetary  conditions  which  con-  state  of  the4 
fronted  the  administration  of  Lincoln  in  1861  were  such  ^^sury' 
as  would  have  severely  taxed  a  finance  minister  with 
the  genius  of  Hamilton  and  the  wide  experience  of 
Gallatin.  The  Nation  was  at  the  brink  of  civil  war,  the 
outcome  of  which  could  not  be  foreseen.  Its  debt  of 
about  $76,000,000  was  greater  than  at  any  time  since 
the  period  following  the  War  of  18 12,  and  most  of  this 
debt  had  been  created  during  years  of  peace.  The 
Nation's  credit  was  poor,  its  securities  having  been  sold 
at  more  than  10  per  cent  below  par  by  the  outgoing 
Secretary  of  the  Treasury. 

The  currency  consisted  of  about  $250,000,000  of  specie  The  cuf- 
and  $200,000,000  of  bank-notes,  and  whilst  the  1600 
banks,  as  a  whole,  possessed  a  fair  quantity  of  specie 
(probably  45  per  cent  of  their  note-issues),  most  of  it 
was  held  by  the  banks  in  the  money  centres.  The 
condition  of  the  paper  circulation  was  very  far  from 
satisfactory.  Great  dissimilarity  in  the  laws  governing 
banks  in  the  several  states  precluded  uniformity,  secur- 
ity, or  safety.  There  was  no  central  place  of  redemption, 
hence  most  notes  were  at  a  discount,  varying  with  the 
distance  from  the  bank  of  issue.  It  was  estimated  that 
there  were  7000  kinds  and  denominations  of  notes,  and 
fully  4000  spurious  or  altered  varieties  were  reported. 
n  177 


178  CONTEST  FOR  SOUND  MONEY 

The  government's  funds  were  held  in  the  sub- 
treasuries  and  mints,  in  specie,  but  the  amount  was 
small,  the  revenues  having  been  for  some  time  insuffi- 
cient to  meet  the  expenses.  The  tariff  law  passed  on 
March  2,  1861,  had  not  yet  become  effective.  The 
Treasury  possessed  power  to  issue  bonds  and  Treasury 
notes,  granted  by  the  Congress  which  had  just  expired. 
As  the  bonds  would  not  bring  par  (some  selling  at  94, 
others  as  low  as  86),  Treasury  notes  were  issued,  since, 
being  receivable  for  duties,  they  were  approximately 
•  worth  par. 

Chase's  Government  needs  became  more  pressing  as  the  im- 

first  report,  pending  war  developed,  and  Congress  was  called  in 
extra  session  July  4,  1861.  Secretary  Chase,  in  his 
report  to  Congress,1  estimated  the  sum  required  at 
$318,000,000  and  recommended  both  taxation  and  loans. 
His  plan  embraced  taxation  sufficient  to  cover  the  ordi- 
nary expenses  of  the  government,  interest  on  the  debt, 
and  provision  for  the  sinking  fund,  the  extraordinary 
expenses  to  be  covered  by  loans.  His  scheme  for  bor- 
rowing included  non-interest-bearing  notes  payable  on 
demand,  interest-bearing  notes  for  short  terms,  and 
bonds  for  long  terms  ;  the  first  to  be  convertible  into  the 
second,  and  the  second  into  the  third,  form  of  obligation. 
Thus  he  expected  to  avert  the  evil  which  many  of  his 
predecessors  experienced,  of  being  compelled  to  receive 
for  payments  to  the  Treasury  the  notes  of  state  banks, 
most  of  which  were  fluctuating  in  value,  and  might  even 
become  valueless  on  his  hands.  He  hoped  that 
$100,000,000  of  the  loan  might  be  placed  abroad,  but 
this  hope  was  not  realized.  While  thus  suggesting 
notes  to  circulate  as  money,  he  urged  great  care  "  to  pre- 
vent the  degradation  of  such  issues  into  an  irredeemable 
paper  currency,  than  which  no  more  certainly  fatal  ex- 

1  Finance  Report,  July,  1861. 


UNITED  STATES  LEGAL   TENDER  NOTES        179 

pedient  for  impoverishing  the  masses  and  discrediting 
the  government  of  any  country  can  well  be  devised." 

Congress  adopted  Chase's  plan  in  the  act  of  July  17, 
1 86 1,1  which  authorized  the  borrowing  of  $250,000,000, 
either  in  6  per  cent  twenty-year  bonds,  or  7.30  per  cent 
three-year  Treasury  notes  in  denominations  not  less  than 
$50,  or  in  one-year  3.65  per  cent  notes,  or  non-interest- 
bearing  notes  of  less  than  $50,  redeemable  on  demand. 
Notes  under  $10  were  prohibited,  and  the  demand  notes  Demand  and 
were  not  to  exceed  $50,000,000.  These  might  also  be 
issued  to  pay  public  creditors  and  be  redeemed  in  7.30's, 
and  when  redeemed  they  might  be  reissued  at  any  time 
prior  to  December  31,  1862,  provided  the  total  limit  of 
the  loan  was  not  exceeded.  The  amending  act  of 
August  5,  1 86 1,  provided  for  the  exchange  of  the  7.30 
notes  into  bonds,  the  limit  of  the  loan  ($250,000,000) 
not  to  be  exceeded ;  for  the  issue  of  "  demand  "  notes  of 
$5  ;  directed  that  the  latter  class  be  receivable  for  all 
public  dues  ;  furthermore,  suspended  the  subtreasury  act 
of  1846,  so  far  as  to  permit  the  moneys  received  from 
loans  to  be  deposited  in  "  solvent,  specie-paying  banks  " 
and  drawn  upon  for  payments.  It  will  be  observed  that 
the  demand  notes  were  not  made  specifically  payable  in 
coin,  but  were  universally  regarded  as  coin  notes,  since 
no  other  legal  tender  money  existed  at  the  time. 

In  his  report  in  December,  1861,  Chase,  still  hopeful  Chase's 
of  an  early  cessation  of  the  war,  discussed  two  plans  for  rep0rt. 
the  currency.  He  pointed  out  that  the  banks  in  the 
states  in  rebellion  had  about  one-fourth  of  the  estimated 
circulation  for  the  whole  country,  and  that  of  the  re- 
maining $150,000,000  a  very  considerable  part  was  of 
doubtful  value  in  emergency.  He  ventured  the  opinion 
that  the  issue  of  state  bank-notes  was  not  constitutional, 
and   proposed  that  the  large  amount   thus   practically 

1  See  Appendix. 


i8o 


CONTEST  FOR  SOUND  MONEY 


National 
currency 
recom- 
mended. 


War 

estimates 

increased. 


borrowed,  without  interest,  from  the  people  by  state 
banks,  should,  by  legislation,  be  made  to  inure  to  the 
advantage  of  the  general  government.  An  issue  of 
government  notes  would,  in  his  opinion,  serve  the  pur- 
pose of  furnishing  a  uniform  circulating  medium,  and  at 
the  same  time  aid  the  government  in  its  emergency ; 
but  the  dangers  of  overissue,  inadequate  provision  for 
redemption,  and  consequent  depreciation  were,  he 
thought,  so  great  as  to  outweigh  the  advantages.  He 
therefore  recommended  a  national  bank  currency  secured 
by  bonds,  which  would  yield  all  that  a  government  issue 
could,  and  not  be  open  to  the  same  criticism. 

The  Treasury  had  met  its  immediate  needs  up  to  this 
time  with  demand  and  7.30  notes,  a  sale  of  two  lots  of 
$50,000,000  each  of  the  latter  having  been  "under- 
written" and  "placed"  by  the  banks  of  New  York, 
Philadelphia,  and  Boston.  Chase  had  arranged  with 
the  banks  for  a  further  placing  of  $50,000,000  in  6  per 
cent  bonds  on  a  7  per  cent  basis,  and  there  was  an 
understanding  that  still  another  $50,000,000  would  be 
taken  in  January,  1862.  He  also  issued  the  Treasury 
notes  authorized  by  the  laws  of  the  previous  Congress. 

At  the  special  session  of  Congress  in  July,  Chase  had 
estimated  the  government's  expenditures  for  the  fiscal 
year  at  $318,000,000.  In  his  December  report x  the  esti- 
mate was  increased  over  $200,000,000,  and  at  the  same 
time  he  showed  that  the  revenue  would  fall  far  below 
the  amount  he  had  expected.  Figures  of  such  unusual 
magnitude  at  that  time  were  appalling,  and  had  a  most 
depressing  effect.  An  international  complication  arose 
at  this  time  which  had  a  far-reaching  influence  upon  the 
finances  of  our  country.  The  confederate  government 
sought  to  send  representatives  abroad,  presumably  to 
negotiate  for  the  recognition  of   the    Confederacy  by 

1  Finance  Report,  December,  1861. 


UNITED  STATES  LEGAL   TENDER  NOTES        181 

European  nations,  and  also  to  negotiate  for  loans.  Cap- 
tain Wilkes,  commanding  the  San  Jacinto,  forcibly  took 
from  the  British  steamer  Trent,  plying  between  Havana  The  Trent 
and  Southampton,  two  commissioners  of  the  Confeder-  affiur* 
acy,  Messrs.  Mason  and  Slidell.  There  was  great  re- 
joicing over  this  capture  throughout  the  country,  and 
Captain  Wilkes  was  thanked  by  Congress.  When  the 
news  of  the  capture  reached  England,  the  greatest  indig- 
nation was  aroused  over  what  was  deemed  a  wanton 
insult  to  the  British  flag.  The  surrender  of  the  prison- 
ers and  an  apology  were  demanded,  coupled  with  in- 
structions to  the  British  Minister  in  Washington  to  ask 
for  his  passports  in  case  the  demands  were  not  complied 
with.  The  patriotic  fervor  with  which  the  capture  had 
been  received  and  applauded  made  it  exceedingly  diffi- 
cult and  certainly  distasteful  for  the  administration  to 
comply  with  the  British  demands,  and  yet  the  alternative 
seemed  war  with  a  great  and  powerful  nation,  in  addi- 
tion to  the  struggle  with  the  Confederacy.  Calm  con- 
sideration showed  the  British  position  to  be  well  taken, 
and  the  demands  were  therefore  complied  with.  The 
news  of  the  British  demand  was  received  in  New  York 
December  16,  and  precipitated  a  quasi  panic.1 

Chase,  as  authorized  in  placing  his  loans  with  the  Chase  and 
banks  and  through  them,  had  utilized  the  banks  as  tem-  thebanks- 
porary  depositories  of  the  proceeds  of  the  loans.  They 
rightfully  expected  these  funds  to  remain  on  deposit  and  be 
checked  out  to  meet  the  government's  needs  as  they  arose. 
Chase,  however,  construed  the  subtreasury  act  rigidly 
and  required  the  transfer  of  the  funds  in  specie  to  the 
Treasury.  This  at  once  deprived  the  banks  of  a  large 
part  of  their  reserve,  created  a  money  stringency,  and 
coupled  with  the  appalling  expenditures  of  the  govern- 
ment  and   the   Trent  affair  resulted   in    suspension  of 

1  White,  Money  and  Banking. 


1.82 


CONTEST  FOR  SOUND  MONEY 


Suspension 
of  specie 
payments. 


Legal 

tenders  pro- 
posed. 


Chase's 

policy 

discussed. 


specie  payments  near  the  close  of  December,  1861.  The 
banks  had  at  the  time,  according  to  their  reports,  $102,- 
000,000  of  specie  against  $184,000,000  of  notes.  The 
Treasury  was  compelled  to  suspend  specie  payments  also, 
and  the  Secretary  was  forced  to  readjust  his  plans. 

He  still  urged  his  bank-note  measure,  and  a  compre- 
hensive bill  for  the  purpose  was  introduced  in  Congress. 
A  bill  to  issue  more  government  notes  was  also  pre- 
pared, which  being  shorter  and  less  complex  in  its 
nature,  appealed  to  Congress  and  was  given  prece- 
dence. Chase,  harassed  by  inability  to  place  bonds  or 
7.30  notes,  with  demands  upon  him  amounting  to  a 
million  and  a  quarter  dollars  daily,  not  only  assented  to 
the  latter  measure,  but  urged  its  speedy  adoption.  As 
demand  notes  at  the  time  were  not  redeemed  in  coin 
"on  demand,"  the  Treasury  found  it  difficult  to  pay 
them  out.  Banks  and  others  were  refusing  them.  It 
was  therefore  proposed  to  make  the  new  issue  legal 
tender,  which  Chase  also  urged  upon  Congress  very 
reluctantly  and  under  the  plea  of  necessity. 

Unlike  Hamilton,  he  failed  to  grasp  the  principles  of 
finance  as  applied  to  government.  Instead  of  seeking 
the  best  way  he  seems  to  have  sought  the  easiest.  The 
most  easily  available  resource  which  the  government 
had  was  the  issuance  of  United  States  notes  with  legal 
tender  power.  These  were  immediately  available  for 
the  payment  of  the  government's  obligations.  When- 
ever bonds  were  issued  the  element  of  time  necessarily 
entered  in  order  to  negotiate  their  sale.  Secretary  Chase 
made  a  great  mistake  in  not  asking  for  largely  increased 
taxation  immediately  at  the  outbreak  of  the  war.  The 
patriotic  spirit  of  the  country  would  undoubtedly  have 
insured  compliance  with  his  request,  thereby  avoiding 
the  occasion  for  issuing  so  great  a  volume  of  legal  ten- 
der notes.  Adams,  in  Public  Debts,  lays  down  the 
governing  principle  in  such  emergencies  as  follows  :  — 


UNITED  STATES  LEGAL   TENDER  NOTES        183 

"  It  is  a  recognized  fact  that  self-governing  peoples  are 
stronger  for  tax  purposes  than  the  subjects  of  a  monarchical 
state,  for  their  will  lies  more  closely  to  the  heart  of  the  state. 
But  the  administration  of  a  self-governing  people  should  never 
undertake  a  war  in  favor  of  which  there  is  no  strong  sentiment. 
As  things  go,  then,  in  democratic  countries,  it  does  not  appear 
that  loans  to  the  full  extent  of  extraordinary  demands  are  neces- 
sary, and  there  is  no  question  as  to  the  superiority  of  taxes  over 
loans  when  their  use  will  not  curtail  industrial  energy.  The 
measure  of  this  first  money-tax  should  be  the  popular  enthusiasm 
for  the  war." 

Taught  by  experience,  Chase  recognized  this  prin- 
ciple later.  He  said  to  Congress  in  1863  that  it  was 
not  too  much,  and  perhaps  hardly  enough,  to  say  that 
every  dollar  raised  by  taxation  for  extraordinary  pur- 
poses or  reduction  of  debt  is  worth  two  in  the  increased 
value  of  national  securities.  He  excused  his  failure 
to  ask  for  additional  taxation  immediately  because  of 
the  impossibility  of  realizing  in  advance  the  long  con- 
tinuance and  enormous  expenditure  involved  in  the  war.1 

Pending  the  discussion  of  the  measure,  Congress  on  Legal  tender 
February   n  authorized  the  issue  of  $10,000,000  more  ac  passe 
"  demand  notes."     The  legal  tender  act  of  February  25, 
1862,  provided  for  the  issue  of   $150,000,000   United 
States  notes  (of  which  $60,000,000  were  to  redeem  the 
demand  notes)  to  be  "  lawful  money  "  and  legal  tender 
for  all  debts,  public  and  private,  except  customs  duties 
and  interest  on  the  public  debt,  both  of  which  were  to 
be  payable  in  coin.     No  denominations    less   than    $5 
were  to  be  issued.     They  were  made  convertible  into  6 
per  cent,  five-twenty  year  bonds,  and  receivable  at  par  s-2obonds- 
the  same  as  coin  for  all  loans  to  the  government,  and 
when   received    by   the   Treasury   might   be    reissued. 
The  act  further  provided  for  the  issue  of  $500,000,000 
of  the  bonds  mentioned  above,  to  fund  the  notes,  or  to 

1  Finance  Report,  1863. 


1 84 


CONTEST  FOR  SOUND  MONEY 


Public  opin- 
ion on  legal 
tender  law. 


be  sold  at  the  market  value  for  coin,  or  for  any  Treasury 
notes  authorized  to  be  issued.  The  coin  from  customs 
revenues  was  pledged  for  the  interest  on  the  debt  and 
the  creation  of  a  sinking  fund.  The  Treasury  was  fur- 
ther empowered  to  issue,  in  exchange  for  notes,  tem- 
porary loan  certificates  in  sums  not  less  than  $100,  run- 
ning not  less  than  thirty  days,  with  interest  not  more 
than  5  per  cent,  the  amount  not  to  exceed  $25,000,000. 
The  act  also  exempted  securities  of  the  United  States 
from  state  and  municipal  taxation. 

This  measure  caused  much  discussion,  both  in  and 
out  of  Congress.  There  was  no  precedent  for,  and 
apparently  every  reason  against,  constituting  the  notes 
money  and  making  them  legal  tender.  Lincoln  and 
Chase  very  reluctantly  accepted  it  as  a  necessary  evil. 
The  Committee  on  Ways  and  Means  was  evenly  divided 
on  the  question  of  favorably  reporting  the  bill.  Thad- 
deus  Stevens  (the  Republican  leader  in  the  House), 
Spaulding,  and  others  of  the  dominant  party,  declared 
the  measure  warranted  only  by  the  necessities  of  the 
war,  the  saving  of  the  Union.  Nevertheless  such  Repub- 
licans as  Morrill,  of  Vermont,  and  Conkling,  and  nearly 
all  the  Democratic  representatives,  led  by  Pendleton  and 
Vallandigham,  opposed  it  as  unnecessary,  inexpedient, 
and  unconstitutional.  In  the  Senate  Fessenden,  Sher- 
man, and  Sumner  gave  reluctant  assent,  the  first  named 
opposing  and  voting  in  favor  of  omitting  the  legal  ten- 
der clause.  Among  those  afterwards  prominent  in  cur- 
rency legislation  who  favored  the  bill  were  Windom, 
Kelley,  Hooper,  Morrill  (Me.);  and  among  the  oppo- 
nents, Morrill  (Vt),  Cox,  and  Holman.  The  bill  passed 
the  House  by  a  vote  of  93  to  59 ;  in  the  Senate  the 
legal  tender  clause  was  retained  by  a  vote  of  22  to  17, 
and  the  bill  passed  by  30  to  7,  only  3  Republicans  voting 
nay. 


UNITED  STATES  LEGAL   TENDER  NOTES        185 

Opinion  in  banking  and  business  circles  was  divided, 
but  leading  Chambers  of  Commerce  passed  resolutions 
urging  the  adoption  of  the  measure,  and  popular  opinion 
was  generally  favorable. 

Chase  in  his  letter  to  the  House  Committee  said  that  Chase. 
he  felt  — 

"  a  great  aversion  to  making  anything  but  coin  a  legal  tender 
in  payment  of  debts.  It  has  been  my  anxious  wish  to  avoid 
the  necessity  of  such  legislation.  It  is,  however,  at  present  im- 
possible, in  consequence  of  the  large  expenditures  entailed  by 
the  war,  and  the  suspension  of  the  banks,  to  procure  sufficient 
coin  for  disbursements,  and  it  has,  therefore,  become  indispen- 
sably necessary  that  we  should  resort  to  the  issue  of  United 
States  notes."  1 

He  urged  such  legislation  as  would  "  divest  the  legal 
tender  clause  of  the  bill  of  injurious  tendencies,  and 
secure  the  earliest  possible  return  to  a  sound  currency 
of  coin  and  promptly  convertible  notes."  i 

Spaulding  said  :  —  Spauiding. 

"The  bill  before  us  is  a  war  measure,  a  measure  of  necessity, 
and  not  of  choice.  .  .  .  These  are  extraordinary  times,  and 
extraordinary  measures  must  be  resorted  to  in  order  to  save 
our  government,  and  preserve  our  nationality." 

The  tax  and  banking  measure  proposed  would  operate 
too  slowly  to  provide  means  to  continue  the  war. 

Stevens  Said  :  —  Stevens. 

"  No  one  would  willingly  issue  paper  currency  not  redeemable 
on  demand  and  make  it  a  legal  tender.  ...  I  look  upon  the 
immediate  passage  of  the  bill  as  essential  to  the  very  existence 
of  the  government.  Reject  it,  and  financial  credit,  not  only 
of  the  government,  but  of  all  the  great  interests  of  the  coun- 
try, will  be  prostrated." 

Pendleton,  opposing,  said,  as  to  the  constitutionality: —  Pendleton. 

"  I  find  no  grant  of  this  power  in  direct  terms,  or,  as  I  think, 
by  fair  implication.     It  is  not  an  accidental  omission  ;  it  is  not 

•  l  Schuckers,  Life  of  Chase. 


1 86 


CONTEST  FOR  SOUND  MONEY 


an  omission  through  inadvertency ;  it  was  intentionally  left  out 
of  the  Constitution,  because  it  was  designed  that  the  power 
should  not  reside  in  the  federal  government." 

Conkiing.  Conkling  on  the  same  subject  said  :  — 

"  Had  such  a  power  lurked  in  the  Constitution,  as  construed 
by  those  who  ordained  and  administered  it,  we  should  find  it 
so  recorded."  The  "  universal  judgment  of  statesmen,  jurists, 
and  lawyers  has  denied  the  constitutional  right  of  Congress  to 
make  paper  a  legal  tender  for  debts  to  any  extent  whatever." 

Morrill.  Morrill  of  Vermont  spoke  of  it  as  "a  measure  not 

blessed  by  one  sound  precedent,  and  damned  by  all !  " 
He  characterized  it  as  of  doubtful  constitutionality,  im- 
moral, a  breach  of  the  public  faith.  He  predicted  that 
it  would  increase  the  cost  of  the  war,  banish  all  specie 
from  circulation,  degrade  us  in  the  estimation  of  other 
nations,  cripple  American  labor,  and  throw  larger  wealth 
into  the  hands  of  the  rich  ;  that  there  was  no  necessity 
for  so  desperate  a  remedy. 

Fessenden.         In  the  Senate  Fessenden  said  :  — 

"  The  .  .  .  clause  making  these  notes  a  legal  tender  is  put 
upon  the  ground  of  absolute,  overwhelming  necessity ;  .  .  .  the 
question  then  is,  does  the  necessity  exist?  .  .  ." 

He  would 

"  take  the  money  of  any  citizen  against  his  will  to  sustain  the 
government,  if  nothing  else  was  left,  and  bid  him  wait  until  the 
government  could  pay  him.  It  is  a  contribution  which  every 
man  is  bound  to  make  under  the  circumstances.  We  Can  take 
all  the  property  of  any  citizen.  That  is  what  is  called  a  forced 
contribution.  .  .  .  The  question  after  all  returns :  Is  this 
measure  absolutely  indispensable  to  procure  means?  If  so, 
as  I  said  before,  necessity  knows  no  law.  .  .  .  Say  what  you 
will,  nobody  can  deny  that  it  is  bad  faith.  If  it  be  necessary 
for  the  salvation  of  the  government,  all  considerations  of  this 
kind  must  yield ;  but  to  make  the  best  of  it,  it  is  bad  faith,  and 
encourages  bad  morality,  both  in  public  and  private.  Going 
to  the  extent  that  it  does,  to  say  that  notes  thus  issued  shall  be* 


UNITED  STATES  LEGAL   TENDER  NOTES        187 

receivable  in  payment  of  all  private  obligations,  however  con- 
tracted, is  in  its  very  essence  a  wrong,  for  it  compels  one  man 
to  take  from  his  neighbor,  in  payment  of  a  debt,  that  which  he 
would  not  otherwise  receive,  or  be  obliged  to  receive,  and  what 
is  probably  not  full  payment." 

Collamer  said  that  the  men  of  the  period  of  the  adop-  Coiiamer. 
tion  of  the  Constitution  always 

"entertained  the  opinion  that  the  United  States  could  have 
nothing  else  a  tender  but  coin.  While  they  lived  there  never 
was  such  a  thing  thought  of  as  attempting  to  make  the  evi- 
dences of  the  debt  of  the  government  a  legal  tender,  let  their 
form  be  what  they  might." 

There  were  two  modes  of  replenishing  the  Treasury ; 
one  was  by  taxation,  and  the  other  was  by  borrowing. 
To  borrow  money  there  must  be  a  lender  and  a  bor- 
rower, and  both  should  act  voluntarily,  and  not  compel 
the  lender  to  part  with  his  money  without  an  induce- 
ment. "  The  operation  of  this  bill  is  not  anything  like 
as  honorable  or  honest  as  a  forced  loan." 

Sherman  said  that  the  legal  tender  clause  was  neces-  Sherman, 
sary  to  make  the  notes  acceptable ;  it  was  after  all  a 
mere  temporary  expedient  necessary  to  save  the  gov- 
ernment. 

"  I  am  constrained  to  assume  the  power,  and  refer  our  au- 
thority to  exercise  it  to  the  courts.  I  have  shown  .  .  .  that 
we  must  no  longer  hesitate  as  to  the  necessity  of  this  measure. 
That  necessity  does  exist,  and  now  presses  upon  us." 

He  thought  himself  required  to  vote  for  all  laws  neces- 
sary and  proper  for  executing  the  powers  given  to 
uphold  the  government. 

"This  is  not  the  time  when  I  would  limit  these  powers. 
Rather  than  yield  to  revolutionary  force,  I  would  use  revo- 
lutionary force." 

Howe  said  :  —  Howe. 

"Those  who  deny  the  constitutional  authority  to  pass  this 
bill  must  deny   its  necessity  or  its  propriety,  .  .  .  ought  to 


188 


CONTEST  TOR  SOUND  MONEY 


Bayard. 


Sumner. 


Reasons  for 
legal  tender 
proviso. 


show  us  some  plan  for  avoiding  it,  some  measure  adequate 
to  the  emergency,  and  more  proper  than  the  one  proposed  by 
this  bill.  ...  It  is  evident  that  no  substitute  can  be  provided 
except  it  be  taxation  or  direct  loans." 

Taxation  alone  could  not  provide  the  vast  sums  required, 
and  direct  loans  were  equally  impracticable. 
J.  A.  Bayard  said  :  — 

"  No  one  can  deny  the  fact  that  in  contracts  between  man 
and  man,  and  in  government  contracts  to  pay  money,  the 
obligation  is  to  pay  intrinsic  value.  If  you  violate  that  by  this 
bill,  which  you  certainly  do,  how  can  you  expect  that  the  faith 
of  the  community  will  be  given  to  the  law  which  you  now  pass, 
in  which  you  say  that  you  will  pay  hereafter  the  interest  on 
your  debt  in  coin?  Why  should  they  give  credit  to  that  decla- 
ration ?  If  you  can  violate  the  Constitution  of  the  United  States 
in  the  face  of  your  oaths,  in  the  face  of  its  palpable  provision, 
what  security  do  you  offer  to  the  lender  of  the  money  ?  " 

Sumner  said :  — 

"Surely  we  must  all  be  against  paper  money,  we  must 
all  insist  upon  maintaining  the  integrity  of  the  government; 
and  we  must  all  set  our  faces  against  any  proposition  like  the 
present,  except  as  a  temporary  expedient,  rendered  imperative 
by  the  exigency  of  the  hour." 

Lincoln,  engrossed  with  a  multitude  of  onerous  duties, 
approved  the  act  without  comment. 

Much  opposition  was  caused  by  the  clause  inserted 
by  the  Senate,  which  provided  for  payment  of  interest 
on  bonds  in  coin,  which  practically  meant  a  discrimina- 
tion in  favor  of  one  class  of  creditors,  and,  as  Stevens 
said,  depreciated  at  once  the  money  which  the  bill 
created. 

It  is  obvious  that  few  of  the  men  charged  with  affairs 
believed  the  legal  tender  act  constitutional.  It  was 
considered  warranted  only  by  extreme  necessity,  as  a 
temporary  measure,  to  save  the  Union  and  hence  the 
Constitution  itself.     Had  the  banks  been  able  to  main- 


UNITED  STATES  LEGAL   TENDER  NOTES        189 

tain  specie  payments  and  aid  the  Treasury  in  greater 
measure,  and  had  the  banks  and  the  people  accepted 
the  demand  notes,  the  legal  tender  provision  would  have 
been  unnecessary. 

It  will  be  observed  that  the  act  did  not  specify  how 
or  when  the  notes  were  payable,  nor  was  any  other 
provision,  except  the  convertibility  into  bonds,  made 
for  their  eventual  retirement.  The  power  to  reissue 
them  when  received  into  the  Treasury  contemplated 
their  continuous  circulation  until  Congress  directed 
otherwise.  The  faces  of  the  notes  bore  the  simple 
statement  that  "  The  United  States  will  pay  the  bearer 
dollars." 

Congress  passed  additional  tax  laws,  but  these  did  Temporary 
not  produce  funds  at  once.  An  act  of  March  1,  1862, 
adopted  Chase's  recommendation  that  certificates  of 
indebtedness,  to  run  one  year,  at  6  per  cent,  be  issued 
to  public  creditors  who  would  receive  them,  and  one  of 
March  17,  authorizing  him  to  purchase  coin  with  any 
securities  authorized  to  be  issued  upon  terms  which 
appeared  to  him  advantageous ;  increased  the  limit  of 
temporary  loan  certificates  to  $50,000,000 ;  and  made 
the  demand  notes  legal  tender.  It  also  permitted  the 
issue  of  new  for  worn  notes. 

The  effect  of  the  act  of  February  25  upon  the  gen- 
eral status  of  the  currency  was  at  first  not  specially 
marked.  The  premium  on  coin,  which  had  earlier  in 
the  month  reached  4|,  was  at  the  end  of  it  only  2\  per 
cent,  and  in  March  and  April  ranged  from  two  and  a 
fraction  down  to  one.  Demand  notes,  being  receivable 
for  customs,  were  approximately  equal  to  coin.  The 
new  notes  literally  took  the  place  of  the  coin  in  circula- 
tion and  were  rapidly  absorbed,  few  being  presented 
for  conversion  into  the  6  per  cent  bonds  waiting  for  „ 

r  °  Premium 

them  at  the  Treasury.     In  May  the  premium  on  specie  on  coin. 


190 


CONTEST  FOR  SOUND  MONEY 


More  legal 
tenders. 


Fractional 
currency. 


Chase's 
third  report. 


advanced  beyond  4,  and  in  June  rose  to  g\.  One  hun- 
dred and  forty-seven  million  dollars  of  both  kinds  of 
notes  were  in  use,  but  did  not  return  to  the  Treasury 
in  sufficient  volume  to  enable  it  to  maintain  payments. 
Chase  accordingly  asked  in  June  for  authority  to  issue 
an  additional  $150,000,000  of  legal  tender  notes.  Con- 
gress gave  the  required  authority  by  the  act  of  July  n, 
1862,  reserving,  however,  $50,000,000  of  the  notes  for 
the  redemption  of  temporary  loan  certificates,  which 
the  act  permitted  the  Secretary  to  expand  to  a  total 
of  $100,000,000.  Congress  also  adopted  Chase's  recom- 
mendation that  $35,000,000  of  the  notes  to  be  issued  be 
in  denominations  less  than  five  dollars. 

The  total  disappearance  of  specie  had  caused  intoler- 
able trouble  in  providing  small  change.  The  people 
had  resorted  to  a  variety  of  substitutes,  including  post- 
age stamps,  which  suggested  the  authorization  by  the 
act  of  July  17,  1862,  of  an  issue  of  stamps,  and  later 
currency,  for  fractional  parts  of  a  dollar,  at  first  in  the 
form  of  postal  stamps  engraved  on  the  notes,  subse- 
quently in  other  forms.  This  currency  was  made  "  re- 
ceivable," at  first  for  all  dues,  later  for  all  except  customs, 
in  sums  not  over  five  dollars,  and  was  exchangeable  for 
legal  tender  notes  in  like  sums.  The  amount  was  not 
limited  by  this  act.  The  issue  of  tokens  or  currency 
under  one  dollar  by  others  was  strictly  prohibited. 

In  his  report  for  December,  1862,  Chase  estimated 
that  he  would  have  to  borrow  nearly  $300,000,000  for 
the  remainder  of  the  fiscal  year  (to  June  30,  1863)  and 
$600,000,000  for  the  following  year,  unless  the  war 
happily  came  to  an  end.  In  the  discussion  of  the 
manner  of  borrowing  he  treated  the  currency  question 
at  great  length,  pointing  out  that  the  state  banks  had 
increased  their  note-issues  by  $37,000,000,  deposits 
by     $80,000,000,     and     discounts,     $70,000,000.        He 


UNITED   STATES  LEGAL    TENDER  NOTES        191 

argued  that  this  expansion,  and  not  the  issue  of  legal 
tender  notes,  had  caused  the  exports  of,  and  the  pre- 
mium on,  coin  (now  34  per  cent),  since  the  gov- 
ernment notes  outstanding  amounted  to  $210,000,000, 
only  a  trifle  more  than  the  coin  in  circulation  in 
1 86 1,  at  the  time  of  suspension.  While  admitting 
that  the  issue  of  more  notes  was  an  easy  way  for 
the  government  to  pay  the  expenses,  to  do  so  to  any 
material  extent  would  prove  calamitous,  a  "  disastrous 
defeat  of  the  very  purposes  sought  to  be  obtained  by 
it."  A  small  addition  to  the  volume  might,  however, 
not  be  unsafe.     But  he  much  preferred  the  adoption  of  National 

,  ,.  r  -ill  bank  cur- 

the  pending  measure  tor  a  national  bank  currency,  rency  urged, 
which  would  enable  him  to  dispose  of  bonds,  then  not 
readily  salable.  He  recommended  taxing  the  state 
bank-notes  so  as  to  limit  and  reduce  the  volume  and 
permit  United  States  notes  to  fill  the  need  for  increased 
currency  until  the  national  bank  system  should  supply 
the  demand.  In  this  way  he  suggested  that  $50,000,000 
more  of  legal  tender  notes  might  be  useful  within  the 
year,  and  a  like  amount  the  following  year. 

President  Lincoln  in  his  message  at  this  time  (Decern-  Lincoln  on 

1  o^    \        r  1  1  r   ii  i  legal  tenders. 

ber,  1802)  referred  to  the  currency  as  follows  . — 

"  The  suspension  of  specie  payments  by  the  banks,  soon  after 
the  commencement  of  your  last  session,  made  large  issues  of 
United  States  notes  unavoidable.  In  no  other  way  could  the 
payment  of  the  troops,  and  the  satisfaction  of  other  just  demands, 
be  so  economically  or  so  well  provided  for.  The  judicious  leg- 
islation of  Congress,  securing  the  receivability  of  these  notes 
for  loans  and  internal  duties,  and  making  them  a  legal  tender 
for  other  debts,  has  made  them  a  universal  currency ;  and  has 
satisfied,  partially,  at  least,  and  for  the  time,  the  long-felt  want 
of  an  uniform  circulating  medium,  saving  thereby  to  the  people 
immense  sums  in  discounts  and  exchanges. 

"  A  return  to  specie  payments,  however,  at  the  earliest  period 

1  Messages  of  Presidents,  Vol.  VI. 


192 


CONTEST  FOR  SOUND  MONEY 


Fluctuating 

currency 

injurious. 


Recom- 
mends 
national 
banks. 


compatible  with  due  regard  to  all  interests  concerned,  should 
ever  be  kept  in  view.  Fluctuations  in  the  value  of  currency  are 
always  injurious,  and  to  reduce  these  fluctuations  to  the  lowest 
possible  point  will  always  be  a  leading  purpose  in  wise  legislation. 
Convertibility,  prompt  and  certain  convertibility  into  coin,  is 
generally  acknowledged  to  be  the  best  and  surest  safeguard 
against  them  ;  and  it  is  extremely  doubtful  whether  a  circulation 
of  United  States  notes,  payable  in  coin,  and  sufficiently  large 
for  the  wants  of  the  people,  can  be  permanently,  usefully,  and 
safely  maintained. 

"  Is  there,  then,  any  other  mode  in  which  the  necessary  pro- 
vision for  the  public  wants  can  be  made,  and  the  great  advan- 
tages of  a  safe  and  uniform  currency  secured  ? 

"  I  know  of  none  which  promises  so  certain  results,  and  is,  at 
the  same  time,  so  unobjectionable,  as  the  organization  of  bank- 
ing associations,  under  a  general  act  of  Congress,  well  guarded 
in  its  provisions.  To  such  associations  the  government  might 
furnish  circulating  notes,  on  the  security  of  United  States  bonds 
deposited  in  the  Treasury.  These  notes,  prepared  under  the 
supervision  of  proper  officers,  being  uniform  in  appearance  and 
security,  and  convertible  always  into  coin,  would  at  once  pro- 
tect labor  against  the  evils  of  a  vicious  currency,  and  facilitate 
commerce  by  cheap  and  safe  exchanges. 

"A  moderate  reservation  from  the  interest  on  the  bonds 
would  compensate  the  United  States  for  the  preparation  and 
distribution  of  the  notes,  and  a  general  supervision  of  the  system, 
and  would  lighten  the  burden  of  that  part  of  the  public  debt 
employed  as  securities.  The  public  credit,  moreover,  would  be 
greatly  improved,  and  the  negotiation  of  new  loans  greatly 
facilitated  by  the  steady  market  demand  for  government  bonds 
which  the  adoption  of  the  proposed  system  would  create. 

"  It  is  an  additional  recommendation  of  the  measure,  of  con- 
siderable weight,  in  my  judgment,  that  it  would  reconcile,  as 
far  as  possible,  all  existing  interests,  by  the  opportunity  offered  to 
existing  institutions  to  reorganize  under  the  act,  substituting  only 
the  secured  uniform  national  circulation  for  the  local  and  various 
circulation,  secured  and  unsecured,  now  issued  by  them." 


State  bank- 
notes. 


The    report    on    state    banks    for    January    i,    1863 
(the    last   published   by   the    Treasury),    showed    that 


UNITED  STATES  LEGAL   TENDER  NOTES        193 

their  circulation   was   nearly   $239,000,000  and   specie 
$101,000,000. 

The  army  being  unpaid  and  Chase  being,  as  he 
stated,  unable  to  sell  bonds  "  at  the  market  price,"  a 
joint  resolution,  authorizing  the  immediate  issue  of 
$100,000,000  of  legal  tender  notes,  was  passed  on 
the  17th  of  January,  1863.  "Inability  to  sell  bonds 
at  the  market  price "  meant  that  offering  any  large 
quantity  would  break  the  market  price  and  force  a 
lower  quotation. 

In  approving  this  resolution  Lincoln  sent  a  message 
to  Congress  cautioning  against  further  note-issues. 

The  act  of  March  3,  1863,  authorized  borrowing 
$300,000,000  for  the  current  fiscal  year  (to  June  30), 
and  $600,000,000  for  the  next.  As  to  the  forms  of  the 
obligations,  the  Secretary  was  given  wide  discretion,  as 
the  circumstances  required;  first,  bonds,  payable  in  not  More  legal 
less  then  ten  nor  more  than  forty  years,  the  interest 
payable  in  coin,  not  to  exceed  6  per  cent,  issuable 
in  exchange  for  notes  or  other  evidences  of  debt; 
second,  notes  payable  in  not  exceeding  three  years,  at 
interest  not  to  exceed  6  per  cent,  in  amount  not  to 
exceed  $400,000,000 ;  these  notes  might  be  made  legal 
tender  for  their  face,  and  be  exchanged  into  the  or- 
dinary legal  tender  notes,  for  which  purpose,  exclusively, 
another  $150,000,000  of  the  latter  was  provided  for  (this 
last-mentioned  authority  was  not,  however,  used  by 
Chase);  third,  legal  tender  notes  in  amount  $150,000,000 
for  ordinary  purposes  of  the  government ;  fourth,  frac- 
tional currency  to  the  limit  of  $50,000,000 ;  fifth,  the  issue 
of  gold  certificates  for  coin  and  bullion,  and  to  an 
amount  equal  to  20  per  cent,  in  excess  of  the  actual  de- 
posit of  gold.  The  act  also  provided  for  a  tax  of  2  per  Tax  on  state 
cent  upon  state  bank-notes  and  for  a  prohibitive  tax  of 
10  per  cent  upon  fractional  note-issues,  and  permitted 


194 


CONTEST  FOR  SOUND  MONEY 


Legal  tenders 
no  longer 
convertible 
into  bonds. 


Chase's  last 
report. 


sales  of  bonds  below  the  market  value,  for  which  Chase 
asked. 

But  the  most  important  feature,  after  the  first  section, 
was  the  proviso  that  after  July  I,  1863,  the  legal  tenders 
could  no  longer  be  exchanged  for  bonds,  practically 
repudiating  the  pledge  made  in  1862,  thus  diminishing 
the  value  of  the  notes  and  conducing  to  their  remaining 
in  circulation  when  not  needed  for  that  purpose.  This 
proviso,  which  had  also  been  asked  for  by  Chase  to  aid 
in  disposing  of  bonds,  was  regarded  by  the  majority  in 
Congress  as  in  the  nature  of  a  limitation,  and  not  a 
breach  of  the  contract.  Shortly  before  adjourning 
Congress  passed  the  national  currency  act,  for  which 
Chase  had  striven  so  assiduously  in  his  attempt  to  give 
the  country  a  safe  and  uniform  paper  medium.  (This 
is  fully  discussed  in  another  chapter.) 

The  premium  on  coin  had  advanced  to  60  in  January 
and  to  72|  in  February;  in  March  it  receded,  falling 
as  low  as  39.  The  Treasury  was,  however,  still  unable 
to  float  bonds  in  sufficient  volume,  and  was  compelled  to 
use  its  note-issuing  powers.  By  end  of  June  $90,000,000 
more  of  the  new  legal  tenders  had  been  put  out,  making 
a  total  of  over  $367,000,000  in  circulation  on  that  date. 

Before  presenting  his  annual  report  to  Congress  in 
December,  1863,  Chase  had  begun  the  issue  of  one  and 
two  year  interest-bea'ring  notes,  and  under  his  discre- 
tionary power  he  made  them  legal  tenders.  In  his  re- 
port he  showed  that  the  tax  laws  produced  much  less 
than  had  been  expected,  and  estimated  an  increase  of 
the  debt  to  June  30,  1864  (over  the  same  date  in  1863), 
of  nearly  $685,000,000,  and  for  the  following  year 
$545,000,000.  He  entertained  the  hope,  however, 
that  internal  revenue  receipts  would  thenceforward  in- 
crease and  the  war  expenses  diminish.  Discussing  the 
currency,  he  recommended  that  no  further  legal   ten- 


UNITED  STATES  LEGAL   TENDER  NOTES        195 

der  note-issues  be  made,  as  the  increase  beyond  the 
#400,000,000  authorized  (besides  #50,000,000  for  re- 
serves) would  certainly  cause  great  depreciation.  The 
country  could  not  absorb  more.  He  expected  good 
results  from  the  national  banking  law,  under  which 
bonds  would  be  taken  and  a  sound  note-issue  take  the 
place  of  the  state  bank  currency. 

Congress  authorized  further  issues  of  bonds,  the  pre-  increased 
payment  of  interest  on  the  debt  for  a  period  of  one  year 
if  the  Secretary  deemed  it  wise,  and  by  the  act  of  June 
30,  1864,  authorized  the  further  issue  of  interest-bearing 
notes  to  run  not  more  than  three  years,  at  interest  not 
to  exceed  7.30  per  cent.  These  notes  might  be  made 
legal  tender  for  their  face  value,  but  were  not  to  be  in 
denominations  under  #10.  The  act  also  gave  the  Sec- 
retary authority  to  exchange  notes  of  all  kinds  provided 
the  limits  fixed  by  law  were  not  exceeded,  and  definitely 
provided  that  the  issue  of  non-interest-bearing  legal 
tender  notes,  which  had  become  distinguished  from 
other  Treasury  notes  by  the  title  "  United  States 
Notes  "  (and  colloquially  by  the  term  "  greenbacks  "), 
should  never  exceed  #400,000,000,  besides  #50,000,000  to 
be  used  as  a  reserve  for  the  temporary  loan  certificates. 
The  limit  of  issue  of  these  last-named  obligations  was 
extended  to  #150,000,000,  the  limit  of  interest  raised  to 
6  per  cent,  and  the  newly  created  national  bank-notes 
were  made  receivable  for  such  loans.  The  same  act 
provided  that  the  interest-bearing  notes  authorized  were  interest- 
not  to  be  legal  tender  for  redemption  of  notes  of  banks.  nates# 
The  national  bank  act  was  on  June  3,  1864,  amended 
in  very  important  particulars. 

The  sales  of  bonds  were  for  a  time  quite  active,  but 
Chase's  attempt  to  float  5  per  cents  proved  abortive, 
and  such  were  the  demands  upon  the  Treasury  for  war 
expenses  that  he  found  it   necessary  to   increase   the 


196  CONTEST  FOR  SOUND  MONEY 

issue  of  the  one  and  two  year  5  per  cent  notes  already 
referred  to,  to  $211,000,000,  and  begin  the  issue  of  three 
year  notes  just  authorized,  making  them  6  per  cent  com- 
pound interest,  instead  of  7.30  per  cent.  They  were 
also  made  legal  tenders  for  their  face  value.  Such 
extreme  use  of  the  legal  tender  power  shows  to  what 
extent  the  credit  of  the  government  under  such  enor- 
mous borrowing  had  become  impaired.  By  June  30, 
1864,  there  were  in  round  numbers  about  $650,000,000 
of  legal  tender  notes  of  all  kinds  in  existence.  The 
interest-bearing  varieties  were  not  all  in  active  circula- 
tion, but  were  used  in  reserves  of  banks,  thus  performing 
some  of  the  money  functions. 

From  December,  1863,  the  premium  on  gold  rose 
steadily  until  it  reached  86  in  May.  In  order  to  check 
speculation  Congress  authorized  the  Secretary  to  sell 
coin  accumulated  in  the  Treasury  beyond  its  needs ;  and 
on  June  17,  1864,  passed  an  act  forbidding  all  sales  of 
gold  and  foreign  exchange  on  "time"  contracts,  and 
prohibited  brokers  from  selling  gold  anywhere  except 
at  their  offices,  thereby  hoping  to  break  up  the  "  gold 
Legal reguia-  exchange."  This  resulted  in  a  rise  in  the  premium 
to  185.  The  act  was  repealed  on  July  6,  1864.  This 
short  period  sufficed  to  convince  Congress  of  the  futility 
of  attempting  to  regulate  the  premium  upon  gold  by 
legislation.  On  the  first  of  July  it  became  known  that 
Chase  had  resigned,  and  the  gold  premium  fluctuated 
between  122  and  150.  Fessenden,  who  as  Chairman  of 
the  Senate  Finance  Committee  was  fully  conversant  with 
all  fiscal  measures,  became  his  successor. 
Compound  Fessenden,  adhering  to  Chase's  policy  in  general,  con- 

notes, tinued  the  issue  of  compound  interest  notes,  with  which 

he  retired  the  short  term  5  per  cent  notes  and  issued 
in  addition  some  $55,000,000  more  than  was  neces- 
sary for  such  retirement  (the  total  issue  having  been 


tion  of  coin 
sales 


UNITED  STATES  LEGAL   TENDER  NOTES        197 

$266,000,000).  Experiencing  difficulty  in  placing  bonds, 
he  also  made  use  of  7.30  notes,  but  without  the  legal 
tender  power,  to  which,  as  has  been  shown,  he  seriously 
objected. 

The  expansion  of  the  currency  occasioned  by  the  con- 
tinued use  of  United  States  notes  was  at  this  time 
increased  by  national  bank  issues,  which  began  to  ap- 
pear in  considerable  volume.  On  the  other  hand,  the 
expansion  was  modified  considerably  by  the  very  rapid 
disappearance  of  state  bank  circulation.  Fessenden  esti- 
mated that  in  November,  1864,  the  amount  of  the  latter 
was  $126,000,000.  National  bank  notes  at  the  time 
amounted  to  $65,000,000,  the  legal  tender  issues  of  all 
classes  to  $675,000,000,  thus  giving  an  aggregate  of 
$866,ooo,ooo.1  The  gold  premium  fluctuated  quite  vio- 
lently, ranging  in  March,  1865,  between  48^  and  101,  but 
diminished  after  July. 

In  the  act  of  March  3,  1865,  complying  with  Fessen-  Currency 
den's  recommendations,  $600,000,000  were  provided  for 
in  bonds  or  Treasury  notes  convertible  into  bonds,  in- 
terest on  the  former  not  to  exceed  6  per  cent,  on  the  . 
latter  7.30  per  cent,  and  none  were  to  be  made  legal 
tenders.  Practically  all  the  remaining  needs  of  the 
government  growing  out  of  the  war  were  supplied  by 
means  of  this  new  issue  of  7.30's  (of  1864-65)  of 
which  approximately  $830,000,000  were  used.  The  in- 
terest as  well  as  the  principal  was  made  payable  in  cur- 
rency, and  they  were  known  as  currency  bonds.  In  the 
revenue  act  of  March  3,  1865,  Congress  laid  such  a  tax 
upon  state  bank  notes  (10  per  cent)  as  to  practically 
prohibit  their  use,  and  they  gradually  disappeared. 

The  provisions  of  the  national  bank  act  of  June  3, 
1864,  constrained  the  banks  to  become  large  owners  of  Leg*1 
legal  tender  notes  as  well  as  of  United  States  bonds.   bank 

1  Finance  Report,  1864.  reserves. 


198  CONTEST  FOR  SOUND  MONEY 

The  banks  were  required  to  provide  for  the  redemption 
of  their  notes  in  "  lawful  money,"  and  to  maintain  re- 
serves of  such  money  for  this  purpose  as  well  as  against 
deposits.  Many  of  these  legal  tender  notes  bore  in- 
terest and  hence  were  a  profitable  form  of  reserve.  The 
non-interest-bearing  ones  were  needed  for  current  use. 
These  wants  necessarily  employed  a  substantial  amount 
of  the  several  forms  of  legal  tender  notes.  The  act  also 
provided  that  national  banks  might  be  designated  as  de- 
positories of  public  money,  upon  giving  security  to  the 
satisfaction  of  the  Secretary  in  "  government  bonds  and 
otherwise." 

Before  the  close  of  the  fiscal  year  1865  (in  April),  the 
war  ceased  and  the  restoration  of  the  finances  to  a  peace 
basis  could  be  considered.  Fessenden  returned  to  the 
Senate  and  was  succeeded  (March  4)  by  Hugh  McCul- 
loch,  whose  long  experience  with  the  state  bank  of 
Indiana  and  as  the  first  Comptroller  of  the  Currency 
under  the  national  banking  law,  peculiarly  fitted  him  for 
the  great  work. 
Review  of  A   brief   review  and   correlation    of    the   portentous 

events  crowded  into  this  short  space  of  four  years  is 
requisite.  Chase  was  the  guiding  spirit  of  the  fiscal 
affairs  of  the  Nation.  Never  before  nor  since  had  a 
finance  minister  wielded  such  power  as  was  placed  in 
his  hands.  In  reviewing  the  manner  in  which  the 
power  was  used  due  consideration  must  be  given  to  the 
unprecedented  conditions  with  which  he  had  to  con- 
tend. Without  experience  as  a  financier,  he  was  re- 
quired to  provide  for  the  expense  of  a  gigantic  war 
rendered  extravagantly  costly  by  inexperience,  want  of 
preparation,  and  failure  to  even  approximately  foresee 
its  magnitude  and  duration.  The  cost  averaged  over 
$2,000,000  a  day  for  the  entire  period,  and  at  its  maxi- 
mum called  for  a  daily  expenditure  of  nearly  $3,000,000. 


the  period. 


UNITED  STATES  LEGAL   TENDER  NOTES        199 

He  had  a  Treasury  without  funds,  a  shattered  public  Chase's  diffi- 
credit,  an  insufficient  revenue,  and  a  heterogeneous  state 
bank  currency  of  fluctuating  and  uncertain  value.  He 
adopted  at  the  outset  a  policy  of  providing  a  homogene- 
ous circulating  medium  which  would  be  safe  alike  for 
government  and  individual,  and  issued  notes  fundable 
into  interest-bearing  bonds.  Believing  that  the  volume 
of  specie  in  the  country,  under  the  influence  of  adverse 
foreign  trade  balances  and  other  demands,  was  totally 
inadequate  to  maintain  coin  payments  for  the  enormous 
volume  of  transactions  which  would  become  necessary, 
unless  an  auxiliary  were  provided,  he  preferred  risking 
the  danger  involved  in  the  issue  of  the  demand  notes 
of  the  government  rather  than  that  certain  to  follow 
from  the  acceptance  of  state  bank-notes. 

While  Chase's  distrust  of  state  banks  was  extreme,  Chase's 
and  he  was  too  rigid  in  his  requirements  in  connection  ^ered0n" 
with  the  execution  of  the  law  authorizing  him  to  deposit 
public  moneys  with  them  (a  course  which  contributed 
materially  to  force  suspension  of  coin  payments),  it  is 
nevertheless  true  that  the  banks  as  a  whole  were  un- 
able to  finance  the  extraordinary  needs  of  the  govern- 
ment, and  it  would  have  been  unwise  to  rely  upon  them. 
The  people  were  not  prepared  to  absorb  the  enormous 
loans  which  the  government  had  to  make,  and  the 
banks  could  not  invest  all  their  funds  in  such  loans. 
No  loans  could  be  placed  abroad.  The  issue  of  United 
States  notes,  to  circulate  as  money,  under  the  circum- 
stances seems  to  have  been  unavoidable  and  hence 
justifiable.  It  has  been  fully  shown  that  both  Lincoln 
and  Chase,  as  well  as  Congress,  believed  it  imperatively 
necessary  a  little  later  to  give  these  notes  legal  tender 
power.  Viewed  in  retrospection  it  seems  to  have  been 
quite  unnecessary.  It  is  by  no  means  fair,  however,  to 
judge  the  acts  of  men  who  could  only  conjecture  the 


200  CONTEST  FOR  SOUND  MONEY 

future  by  the  standard  of  events  as  they  afterwards 
transpired.  The  country  was  rudely  awakened  from 
a  long  period  of  profound  peace.  It  was  quite  ac- 
customed to  the  issue  of  "state  sovereignty"  and 
"popular  sovereignty."  Nullification  by  South  Caro- 
lina in  Jackson's  time  was  recalled.  The  "  Missouri 
Compromise,"  Kansas-Nebraska  controversy,  and  other 
important  incidents  had  familiarized  the  North  with 
the  contention  of  the  slave  states.  The  North  did  not 
believe,  let  alone  realize,  that  the  South  was  determined 
to  put  the  issue  to  the  exhaustive  test  of  final  arbitra- 
ment by  the  sword.  The  best  evidence  of  this  is 
Lincoln's  first  proclamation  calling  for  troops.  Seventy- 
five  thousand  was  the  number  asked  for,  and  ninety  days 
the  period  of  enlistment. 
Taxing  Nations,    like   individuals,    should    live   within   their 

wrone.  income,  and  current  taxes  should  always  equal  current 

expenses,  including,  of  course,  interest  on  any  indebted- 
ness. According  to  principles  laid  down  by  publicists 
and  economists,  extraordinary  expenses,  as  in  case  of 
war,  should  be  met  by  a  judicious  apportionment  of 
increased  taxation  and  loans.  It  is  deemed  just  that 
a  portion  of  extraordinary  expenditure,  whether  in- 
curred in  war  or  for  public  utility  or  permanent 
improvement,  be  devolved  upon  the  succeeding  gen- 
eration, which  is  profited  thereby,  by  means  of  loans 
payable  at  a  future  date.  Had  Chase  applied  this 
principle  in  his  demands  from  Congress  in  July,  1861, 
it  would  have  stood  him  in  good  stead.  Congress, 
beyond  question,  would  have  complied,  and  much 
embarrassment  on  account  of  loans  and  full  tender 
notes  would  have  been  avoided.  In  saying  this  I  do 
not  forget  that  Lincoln's  administration  felt  the  ne- 
cessity of  winning  victories  at  the  polls  as  well  as  in 
the  field,  and  cherished  a  wholesome  and  proper  dread 


wrong. 


UNITED  STATES  LEGAL   TENDER  NOTES        201 

of   the   effect   upon    the    public   of    largely   increased 
taxation. 

The  one  fixed  purpose  of  Secretary  Chase  was  to  Currency 
supplant  the  onerous,  costly,  and  insecure  state  bank  pollcy  sound- 
circulation  by  a  safe,  efficient  national  bank  circulation 
secured  by  government  bonds  and  further  protected  by 
a  lawful  money  reserve  against  both  circulation  and 
deposits.  In  this  way  he  expected  to  find  a  large  de- 
mand and  permanent  use  for  both  bonds  and  legal 
tender  notes.  Had  Congress  promptly  created  the 
national  banking  system  instead  of  waiting  until  1863,  the 
Secretary's  hopes  would  undoubtedly  have  been  largely 
realized,  and  the  volume  of  legal  tender  notes  issued 
would  have  been  very  much  less.  The  power  of  the 
state  banks  was  enormous,  and  they  looked  upon  the 
idea  of  converting  into  national  banks  under  the  pro- 
posed law  with  conservative  fear.  The  treatment  of 
the  two  United  States  banks  at  the  hands  of  Congress 
was  not  at  all  reassuring.  It  is  not  surprising,  however 
regrettable,  that  their  influence  should  have  so  long 
defeated  the  national  system  and  left  the  Secretary 
to  meet  his  responsibilities  by  means  of  Treasury  note- 
issues. 

It  would  seem  that  a  suspension  of  coin  payments  Suspension 
was  inevitable,  even  had  it  not  been  precipitated  by  fnevi^bL 
the  events  heretofore  recounted.  The  great  expansion 
of  trade,  caused  primarily  by  the  enormous  government 
purchases,  required  a  larger  volume  of  money.  With- 
out credit  for  its  securities  abroad  and  with  an  adverse 
foreign  trade  balance,  the  country  could  not  retain  its 
specie,  much  less  draw  from  abroad.  Expansion  of 
paper  currency  under  either  state  or  national  authority 
was  sure  to  follow.  Had  Chase  adhered  to  state  banks 
the  reserves  would  have  proved  inadequate  to  main- 
tain coin  payments,  and  the  country  would  have  been 


202  CONTEST  FOR  SOUND  MONEY 

flooded,  as  before,  with  an  irredeemable  currency  vary- 
ing in  value  from  good  to  worthless.  United  States 
notes  and  national  bank-notes  would  at  least  be  uni- 
form and  ultimately  redeemed,  and  the  advantages  of 
such  circulation,  instead  of  swelling  private  profits, 
would  inure  to  the  benefit  of  the  government  and  be 
applied  to  the  saving  of  the  Union.  Chase  could  not 
but  choose  the  latter.  Fully  appreciating  the  danger 
of  a  redundant  issue  of  government  notes,  he  en- 
deavored to  limit  the  volume,  but  conditions  forced 
him  to  issue  more  and  more,  in  the  face  of  deprecia- 
tion. He  did  so,  doubting  their  legality,  and  hoping 
and  believing  that  the  national  bank  circulation  when 
created  would  take  their  place  and  admit  of  their 
retirement.  In  a  formal  communication  to  Congress 
he  later  condemned  his  own  policy  in  issuing  so  many 
notes  in  lieu  of  imposing  greater  taxation.  As  Chief 
Justice  he  pronounced  the  legal  tender  notes  he  had 
issued  unconstitutional  —  a  most  unique  commentary 
upon  his  own  administration,  and  one  that  is  surely 
without  parallel. 
Recapituia-  The  chain  of  causes  and  effects  may  be  recapitulated 
events.  as  f ollows :  Utter  failure  to  foresee  the  probable  length 

and  magnitude  of  the  war,  hence  failure  to  provide 
largely  increased  taxation,  always  unpalatable  to  short- 
sighted legislators;  first  resort  to  note-issues  rendered 
necessary  by  the  absence  of  a  reputable  currency  system 
and  of  credit  abroad  through  which  specie  could  be 
drawn ;  the  vain  desire  not  to  sell  bonds  at  a  discount, 
and  consequent  inability  to  sell  them  as  rapidly  as  needs 
arose ;  wretched  military  administration  and  waste  in 
innumerable  ways ;  suspension  of  coin  payments  pre- 
cipitated by  unwise  management  and  foreign  complica- 
tions ;  forced  legal  tender  currency  loans  and  expansion 
of  prices,  checking  commodity  exports  and  increasing 


UNITED  STATES  LEGAL   TENDER  NOTES        203 

expenses  ;  heavy  exports  of  specie  naturally  following  ; 
more  legal  tender  currency,  with  further  rise  in  prices 
and  increase  in  expenses  ;  repudiation  of  right  to  fund 
legal  tender  notes  into  bonds  ;  wild  speculation  in  specie 
which  extended  into  all  lines  of  business,  enriching  the 
shrewd  few  at  the  expense  of  the  many.  Net  result,  — 
ultimate  cost  to  the  people  very  much  more  than  it 
would  have  been  had  they  been  taxed  more  heavily  at 
the  outset. 

As  Franklin  had  pointed  out  in  the  days  of  continental 
currency,  the  people  actually  paid  exorbitant  sums  in- 
directly because  they  did  not  pay  the  lesser  amounts 
directly.  It  has  been  said  that  the  "  greenbacks  "  saved 
the  Union.  Be  this  as  it  may,  it  is  certain  that  had  a 
great  national  bank  or  a  system  of  national  banks  existed, 
and  had  a  proper  scheme  of  taxation  been  adopted,  the 
same  result  would  have  been  accomplished  at  far  less 
cost;  and  while  suspension  of  coin  payments  would 
probably  have  been  inevitable,  the  premium  upon  gold 
would  have  been  controllable  and  prices  kept  within 
limits.1 

STATISTICAL   RESUME 

National  Finances  (in  millions  of  dollars) 

(The  government  fiscal  year  ends  June  30.) 


Revenue 

Expenses 

Debt 

Deficit 

Customs 

Other 

Total 

Ordi- 
nary 

Inter- 
est 

Total 

Out- 
standing 

Increase 

1861 

40 

2 

42 

63 

4 

67 

25 

91 

26 

1862 

49 

3 

52 

456 

13 

469 

417 

524 

433 

1863 

69 

43 

112 

694 

25 

719 

607 

1 1 20 

596 

1864 

102 

I4I 

243 

811 

54 

865 

622 

1816 

696 

1865 

85 

237 

322 

1218 

77 

1295 

973 

2681 

865 

1  See  Mitchell,  Sound  Currency,  Vol.  IV.,  No.  8. 


204  CONTEST  FOR  SOUND  MONEY 

Circulation  (in  millions,  except  last  column) 


Fiscal 
Year 

Spe- 
cie 

u.  s. 

Notes 

Bank  Notes 

Total 

> 
B 

•5  < 

w 

■ 

In 
Circu- 
lation 

< 

£2 
O  h 

Per 

capita 

State 

Na- 
tional 

l86l 
1862 
1863 
1864 
1865 

250 

25 
25 
25 
25 

I50 
391 

447 
43 « 

202 
184 

239 
179 

143 

31 
I46 

20 
23 
25 

452 
359 

675 
7°5 
770 

4 
24 
79 
36 
55 

448 

335 
596 
670 
715 

32 

25 
26 

27 
3° 

$14.00 

13.40 

22.66 

24.81 
23-83 

Specie  includes  after  1861  only  the  amount  estimated  in  use  on  Pacific 
Slope.     Population  reduced  by  that  of  states  in  rebellion. 

Exports  and  Imports  (in  millions  of  dollars) 


Fiscal 

Merchandise 

Excess 

Specie 

Excess 

Year 

Exports 

Imports 

+  Import 
—  Export 

Exports 

Imports 

+  Import 
—  Export 

1861  .     . 

1862  .     . 

1863  .     . 

1864  .     . 

1865  .     . 

220 
191 
204 

*59 

166 

289 

189 

243 
316 

239 

+     69 
—         2 

+    39 
+  157 
+    73 

30 

37 
64 

105 

68 

46 
16 
IO 

13 
IO 

+  16 
—  21 

-54 
-92 

-58 

The  Gold  Premium  and  Prices 
(See  Sound  Currency,  Vol.  III.,  No.  17.) 


OS 

Premium  on  Gold 

Gold  Value  of 
Paper 

Gold 
Prices 
U.S. 

Wages 

in 
Gold 

0     m 

x  :S;> 

u  o!> 

£      ° 

Cost  of 
Gold 

< 

High 

Low 

Aver- 
age 

High 

Low 

Aver- 
age 

in 
Labor 

i860 
1861 
1862 
1863 
1864 
1865 

34-0 

72.5 
185.0 

134-4 

I.I 

22.1 

5i-5 
28.5 

13-3 
45-2 
103.3 

57-3 

98.5 

79-5 
64-3 
73-7 

75-6 
62.3 

38.7 
46.3 

IOO 

IOO 
88.3 
68.9 
49.2 
63.6 

I  OO.O 
94.I 

101.6 
91. 1 

1 10.7 

107.4 

100.0 

100.7 

101.2 

81.9 

66.6 

94-5 

I. OOO 
I.050 
I.009 

9-73 
9.00 
7.80 

I. OOO 

•993 

.988 

1. 221 

1.500 
1-057 

CHAPTER   IX 

1866   TO    1875 

The  expenses  of  the  government  did  not  become  nor-  McCuiioch/s 
mal  at  once  after  the  close  of  the  war.  A  great  army  tfo™inistra~ 
had  to  be  disbanded  and  many  obligations  remained  to 
be  paid.  McCulloch  reported  (December,  1865)  that 
the  debt  had  increased  during  the  fiscal  year  nearly 
$942,000,000 ;  he  estimated  a  deficit  in  the  revenue  for 
1866  of  $112,000,000,  but  a  surplus  in  1867  of  almost 
the  same  amount.  The  total  debt  at  its  maximum,  in 
August,  1865,  stood  at  $2,845,900,000.  It  was  expected 
that  it  would  reach  $3,000,000,000,  but  by  this  time  the 
revenues  increased  and  expenditures  diminished.  The 
fiscal  year  1866  showed  $290,000,000  surplus  instead  of 
the  $1 12,000,000  deficit  as  estimated.  Provision  had 
been  made  for  funding  the  floating  debt,  and  this  pro- 
cess, as  well  as  the  reduction,  began  in  the  fall  of  1866. 
The  debt  in  August,  1865,  was  composed  of 

Bonds #1,109,600,000    The  public 

Interest-bearing  legal  tenders  .....  250,900,000    debt. 

Non-interest-bearing  legal  tenders  .....  433,200,000 

7.30's     ..........  830,000,000 

Temporary  debt  and  other  forms     .....  222,200,000 

The  annual  interest  charge  was  in  excess  of    .         .         .  150,000,000 

McCulloch  directed  special  attention  to  the  currency 
portion  of  the  debt,  urging  preparation  for  resumption 
of  specie  payments  and  ultimate  repeal  of  legal  tender 
acts.  But  a  new  idea  had  become  prevalent.  The 
United  States  notes,  popularly  called   "greenbacks,"1 

1  The  word  "  greenback,"  applied  to  the  first  legal  tender  notes  issued 
by  the  government  in  1862  because  of  the  prevailing  color  of  the  back  of 

205 


206 


CONTEST  FOR  SOUND  MONEY 


Contraction 
of  currency. 


Volume  of 
currency. 


were  a  convenient  form  of  money  and  a  non-interest- 
bearing  loan,  hence  their  retention  was  urged  on  the 
double  ground  of  convenience  and  economy.  To  these 
the  Secretary  opposed,  first,  the  extra-constitutional  ex- 
ercise of  power  warranted  only  by  war ;  second,  the 
breach  of  faith  involved  in  failure  to  redeem  ;  third, 
the  evil  effects  which  would  follow  the  continuance  of 
the  inflated  currency.  He  recommended  that  the  legal 
tender  power  of  the  interest-bearing  notes  be  discon- 
tinued after  maturity,  and  that  he  be  authorized  to  sell 
bonds  to  retire  these  as  well  as  the  non-interest-bearing 
notes  (greenbacks).  He  warned  Congress  against  a 
continuance  of  the  policy  of  an  inconvertible  currency, 
predicting  that,  unless  remedied,  the  question  would 
become  a  political  one,  and  few  less  disturbing  to  the 
welfare  of  the  country  could  be  imagined. 

McCulloch  estimated  the  amount  of  currency  on  Octo- 
ber 31,  1865,  at  $704,000,000,  not  including  $205,000,000 
of  interest-bearing  legal  tenders  (nor  the  7.30's);  of 
the  interest-bearing  notes  about  $30,000,000  and  some 
of  the  smaller  7.30's  were  circulating  as  money.  The 
bank-notes  included  in  the  above  total  he  placed  at 
$250,000,000,  of  which  $65,000,000  were  state  bank- 
notes, the  remainder  national  bank  issues  ;  of  the  latter 
class  $115,000,000  might  still  be  issued  within  the  legal 
limit,  some  of  which  would,  however,  replace  the  state 
bank  issues.  The  premium  on  coin  which  in  the  early 
months  of  the  year  stood  at  over  100  (reaching  I33f), 
fell  as  low  as  28|,  closing  in  December  at  45  \. 

President  Johnson  supported  the  recommendations  of 
McCulloch  in  his  message.     He  said  :  — 


the  notes,  is  generally  used  as  a  comprehensive  term  including  all  legal 
tender  notes  issued  prior  to  the  law  of  1890.  It  is  used  interchange- 
ably with  the  term  "  United  States  notes,"  but  colloquially  is  much  more 
popular. 


UNITED  STATES  LEGAL   TENDER  NOTES     207 

"  It  is  our  first  duty  to  prepare  in  earnest  for  our  recovery  from 
the  ever-increasing  evils  of  an  irredeemable  currency,  without  a 
sudden  revulsion  and  yet  without  untimely  procrastination."1 

A  considerable  number  of  public  men  were  inclined  Debt 
to  regard  the  war  debt  as  only  partially  obligatory  upon  rejected.1011 
the  Nation,  owing  to  the  fact  that  depreciated  currency 
had  been  received  for  the  greater  part  of  it,  and  urged 
that  payment  in  coin  commanding  a  high  premium  ought 
not  to  be  insisted  upon.  This  led  to  the  adoption,  on 
motion  of  Representative  Randall  (Dem.,  Pa.),  after- 
wards Speaker,  of  the  following  declaratory  resolution 
in  the  House  on  December  5,  1865,  with  but  one  dissent- 
ing vote :  — 

"Resolved,  That,  as  the  sense  of  this  House,  the  public 
debt  created  during  the  late  rebellion  was  contracted  upon  the 
faith  and  honor  of  the  Nation ;  that  it  is  sacred  and  inviolate 
and  must  and  ought  to  be  paid,  principal  and  interest ;  that 
any  attempt  to  repudiate  or  in  any  manner  to  impair  or  scale 
the  said  debt  shall  be  universally  discountenanced,  and  promptly 
rejected  by  Congress  if  proposed." 

McCulloch    had    actually   begun   the   retirement   of  McCuiioch's 
greenbacks  out  of  the  surplus  revenues.     The  House  of  P°llcy   . 

0  r  indorsed. 

Representatives  on  December  18,  1865,  indorsed  his 
policy  by  almost  unanimous  vote,  and  the  act  of  April 
12,  1866,  authorized  him  to  fund  all  notes  into  bonds  or 
sell  bonds  to  retire  notes,  provided  the  total  debt  was 
not  increased.  The  act  contained  the  limitation  that 
not  more  than  $10,000,000  of  the  "greenbacks"  be  re- 
tired in  the  ensuing  six  months,  and  $4,000,000  monthly 
thereafter.  Other  acts  provided  for  nickel  coins  of 
three  and  five  cents  to  retire  those  denominations  of  the 
fractional  paper  currency. 

This  salutary  legislation  was  not  secured  without  op- 
position from  those  who  might  have  been  expected  to 

1  Messages  of  Presidents,  Vol.  VI. 


208 


CONTEST  FOR  SOUND  MONEY 


Some 
opposition. 


Gold  certifi- 
cates. 


Debt  held 
abroad. 


favor  it.  Stevens,  who  had  proclaimed  in  1862  that  the 
"  greenbacks "  were  only  a  temporary  expedient,  was 
content  to  continue  them  as  a  debt  not  bearing  interest. 
Boutwell  (afterwards  Secretary)  appeared  to  believe  that 
Congress  should  not  interfere  with  events  which  would 
bring  about  resumption  of  coin  payments  automatically. 
Senator  Sherman  (also  later  Secretary)  believed  that  if 
the  Treasury  simply  met  current  obligations,  no  power 
could  delay  resumption  beyond  a  year  and  a  half. 

The  authority  conferred  by  the  act  of  March  3,  1863, 
to  issue  gold  certificates  was  first  made  use  of  by 
McCulloch  on  November  13,  1865.  The  act  of  July  13, 
1866,  amended  the  act  imposing  a  tax  of  10  per  cent  on 
state  bank  circulation,  making  it  apply  to  individuals  as 
well  as  to  banks.  This  effectually  prohibited  their  fur- 
ther use.  The  premium  on  coin  fluctuated  during  the 
calendar  year  1866  between  67!  and  25 1  per  cent,  aver- 
aging 40^,  making  the  average  value  of  the  notes 
about  71  per  cent. 

In  his  report  for  1866  McCulloch  showed  that  he  had 
reduced  the  debt  from  August,  1865,  $164,000,000,  and 
had  a  larger  cash  balance  by  $42,000,000.  The  funding 
had  progressed  satisfactorily.  Nearly  $100,000,000  of 
the  interest-bearing  legal  tenders  were  out  of  the  way, 
and  "  greenbacks  "  had  been  reduced  by  nearly  $43,000,- 
000,  standing  at  $390,195,785.  The  financial  operations 
were  no  doubt  greatly  facilitated  by  the  increased  invest- 
ment of  foreigners  in  our  securities,  thus  enabling  the 
country  to  retain  a  substantial  part  of  its  gold  product. 
McCulloch  estimated  in  1866  that  $600,000,000  of  such 
securities  ($350,000,000  in  United  States  bonds)  were 
held  abroad.  The  amount  of  specie  in  the  country, 
estimated  at  $66,000,000  in  1865,  was  in  1867  given  as 
$139,000,000. 

Criticised  for  holding  so  large  a  balance  in  the  Treas- 


UNITED  STATES  LEGAL    TENDER  NOTES     209 

ury  which  might  have  been  used  in  great  measure  to  McCuiioch's 
save  interest,  he  pointed  out  the  necessity  for  keeping  reserve, 
the  Treasury  strong  in  order  to  maintain  the  stability  of 
the  irredeemable  currency,  regarding  this  end  much 
more  important  to  the  people  than  saving  some  interest. 
His  purpose  was  to  hold  a  reserve  against  these  issues 
precisely  as  a  bank  would,  selling  gold  when  in  his  judg- 
ment advisable  to  reduce  the  premium,  to  limit  deprecia- 
tion of  the  notes.  To  correct  the  evils  which  would 
unquestionably  enrich  the  few  at  the  expense  of  the 
many,  he  recommended  contraction,  tariff  revision,  and 
refunding  the  debt;  and  also  an  amendment  of  the 
national  banking  law  to  compel  banks  to  redeem  their 
notes  at  the  Atlantic  cities  as  well  as  at  their  counters. 

The  act  of  March  2,  1867,  authorized  3  per  cent  Three  per 
temporary  loan  certificates  to  take  up  a  part  of  the  6  ^^er^^ 
per  cent  compound  interest  legal  tender  notes,  thus  sub- 
stituting a  form  of  obligation  not  legal  tender.  The 
certificates  were,  however,  made  available  for  bank 
reserves,  and  thus  served  as  a  substitute  for  "  lawful 
money."     The  issue  was  limited  to  $50,000,000. 

A  very  substantial  sentiment  had  by  1867  manifested 
itself  against  the  retirement  of  legal  tender  notes, 
against  the  national  banks,  and  favorable  to  paying  the 
public  debt  in  greenbacks.      The  word  "contraction"  Opposition 

,  ,  .e    .  to  contrac- 

was  made  to  appear  to  the  masses  as  signifying  a  mon-  tion. 
strous  power  which  would  not  unlikely  rob  them  of  their 
daily  bread.      The  greenbacks    outstanding   had   been 
reduced  to  $356,000,000,  and  the  average  gold  premium 
in  1867  was  38.2  per  cent. 

President  Johnson's  message  for  1867  showed  that  he 
had  not  escaped  the  political  influence  of  the  day.  He 
favored  measures  looking  to  resumption  of  coin  pay- 
ments, but,  he  added,  a  "  reduction  of  our  paper  cir- 
culating  medium    need   not   necessarily   follow."      He 


210 


CONTEST  FOR  SOUND  MONEY 


Greenback 
heresy. 


Contraction 
suspended. 


declared  it  was  unjust  to  pay  bondholders  in  coin  and 
other  creditors  in  depreciated  paper.  He  was  endeavor- 
ing to  obtain  the  support  of  the  "  greenback  "  element 
for  a  renomination.  A  wave  of  economic  heresy  had 
struck  the  people,  especially  in  the  West.  Crop  failures, 
high  prices,  speculation,  and  resulting  business  troubles 
gave  strength  and  numbers  to  the  movement.  The 
greenbacks  were  regarded  as  the  means  of  curing 
the  evils  which  in  fact  they  caused.  The  Democratic 
party,  which  had  opposed  the  legal  tender  acts  as  un- 
constitutional, now  became  their  especial  advocate. 
Pendleton,  who  in  1862  vigorously  denounced  the  first 
act,  now  aiming  for  the  presidency  in  1868,  led  the 
movement  in  favor  of  perpetuating  the  greenbacks. 

Many  of  the  Republican  leaders,  anticipating  defeat 
unless  their  sentiments  were  modified,  yielded  to  the 
storm.  Senator  Sherman,  who  had  predicted  resump- 
tion before  1868,  and  who  had  expressed  the  opinion 
that  the  paper  currency  was  not  redundant  at  a  time 
when  the  premium  on  coin  was  nearly  50  per  cent, 
now  believed  it  proper  to  pay  the  bonds  in  greenbacks, 
and  in  deference  to  public  opinion  proposed  to  stop  con- 
traction. Senator  Morton,  of  Indiana,  favored  more 
note-issues.  Thus  a  Republican  Congress,  which  had 
in  December,  1865,  "pledged  cooperative  action" 
toward  resumption  by  retirement  of  the  notes,  and  early 
in  1866  had.  passed  a  law  authorizing  contraction,  in 
February,  1868,  passed  an  act  suspending  the  authority 
and  prohibiting  further  reduction  of  the  currency  by 
retiring  notes.  President  Johnson,  then  at  odds  with 
Congress,  and  uncertain  as  to  the  best  policy,  did  not 
approve  the  act,  nor  did  he  veto  it,  but  allowed  it  to 
become  law  without  his  approval. 

The  act  of  June  25,  1868,  authorized  the  increase  of 
3    per  cent   certificates  to  the   amount   of  $75,000,000 


UNITED  STATES  LEGAL   TENDER  NOTES     211 

to  retire  the  remaining  compound  interest  notes.  A  bill 
passed  both  houses  of  Congress  on  July  27,  1868,  pro- 
viding for  refunding  the  debt  at  lower  interest  rates,  but 
Johnson  failed  to  approve  the  measure,  and  it  lapsed  by 
the  adjournment  of  Congress. 

The  national  conventions  of  1868  adopted  the  follow- 
ing platform  resolutions  respecting  the  debt  and  the 
currency  question :  — 

Republican  Platform,  at  Chicago,  May. 

"  We  denounce  all  forms  of  repudiation  as  a  national  crime,  Repudiation 
and  the  national  honor  requires  the  payment  of  the  public  in-  enounce  • 
debtedness  in  the  utmost  good  faith  to  all  creditors  at  home 
and  abroad,  not  only  according  to  the  letter,  but  the  spirit  of 
the  laws  under  which  it  was  contracted.  The  national  debt, 
contracted  as  it  has  been  for  the  preservation  of  the  Union  for 
all  time  to  come,  should  be  extended  over  a  fair  period  for 
redemption.  It  is  the  duty  of  Congress  to  reduce  the  rate  of 
interest  thereon  whenever  it  can  honestly  be  done. 

"  That  the  best  policy  to  diminish  our  burden  of  debt  is  to 
so  improve  our  credit  that  capitalists  will  seek  to  loan  us  money 
at  lower  rates  of  interest  than  we  now  pay,  and  must  continue 
to  pay  so  long  as  repudiation,  partial  or  total,  open  or  covert, 
is  threatened  or  suspected." 

Democratic,  at  New  York,  July. 

"  Payment  of  the  public  debt  of  the  United  States  as  rapidly  Payments  ot 
as  practicable  ;  all  moneys  drawn  from  the  people  by  taxation,  bon d*h™cks 
except  so  much  as  is  requisite  for  the  necessities  of  the  Gov- 
ernment, economically  administered,  being  honestly  applied  to 
such  payment,  and  where  the  obligations  of  the  Government  do 
not  expressly  state  upon  their  face,  or  the  law  under  which  they 
were  issued  does  not  provide  that  they  shall  be  paid  in  coin, 
they  ought  in  right  and  in  justice,  to  be  paid  in  the  lawful 
money  of  the  United  States. 

"  Equal  taxation  of  every  species  of  property  according  to 
its  real  value,  including  Government  bonds  and  other  public 
securities. 


212 


CONTEST  FOR  SOUND  MONEY 


Greenback 
movement 
checked. 


President 
Johnson  on 
debt  scaling. 


"One  currency  for  the  Government  and  the  people,  the 
laborer  and  the  office-holder,  the  pensioner  and  the  soldier, 
the  producer  and  the  bondholder." 

The  sound  element  in  the  Republican  party  having  thus 
been  able  to  stem  within  its  ranks  the  tide  of  repudia- 
tion, and  having  nominated  Grant,  whose  popularity  as 
a  hero  of  the  war  unquestionably  assisted  them  materi- 
ally, the  greenback  movement  received  a  check  at  the 
polls. 

Although  discouraged  by  the  reactionary  legislation 
of  Congress,  McCulloch  nevertheless  continued,  in  his 
report  in  December,  1868,  to  urge  upon  that  body  the 
need  of  bringing  the  currency  to  a  coin  basis. 

He  estimated  the  amount  of  American  bonds  held 
abroad  at  $850,000,000,  of  which  $600,000,000  were 
in  "governments." 

In  his  message  of  December,  1868,  Johnson  repeated 
his  views  on  the  currency  of  the  previous  year,  and 
came  out  more  broadly  in  favor  of  "  scaling  "  the  public 
debt,  which  brought  forth  the  following  resolution  in  the 
Senate :  — 

"  Resolved,  That  the  Senate,  properly  cherishing  and  up- 
holding the  good  faith  and  honor  of  the  nation,  do  hereby 
utterly  disapprove  of  and  condemn  the  sentiments  and  proposi- 
tions contained  in  so  much  of  the  late  annual  message  of  the 
President  of  the  United  States  as  reads  as  follows : 

" '  It  may  be  assumed  that  the  holders  of  our  securities  have 
already  received  upon  their  bonds  a  larger  amount  than  their 
original  investment,  measured  by  a  gold  standard.  Upon  this 
statement  of  facts,  it  would  seem  but  just  and  equitable  that 
the  six  per  cent,  interest  now  paid  by  the  Government  should 
be  applied  to  the  reduction  of  the  principal  in  semi-annual  in- 
stallments, which  in  sixteen  years  and  eight  months  would 
liquidate  the  entire  national  debt.  Six  per  cent,  in  gold  would 
at  present  rates  be  equal  to  nine  per  cent,  in  currency,  and 
equivalent  to  the  payment  of  the  debt  one  and   a  half  times 


UNITED  STATES  LEGAL   TENDER  NOTES     213 

in  a  fraction  less  than  seventeen  years.  This,  in  connection 
with  all  the  other  advantages  derived  from  thtir  investment, 
would  afford  to  the  public  creditors  a  fair  and  liberal  compen- 
sation for  the  use  of  their  capital,  and  with  this  they  should  be 
satisfied.  The  lessons  of  the  past  admonish  the  lender  that  it 
is  not  well  to  be  over  anxious  in  exacting  from  the  borrower 
rigid  compliance  with  the  letter  of  the  bond.'  " 

The  hard  fight  that  the  friends  of  sound  money  had 
to  make  can  well  be  imagined  when  the  President,  the 
official  representative  of  the  nation,  in  his  message  to 
Congress,  urged  such  repudiation. 

The  Senate  resolution  was  passed  by  a  strict  party  Repudia- 
vote  of  43  to  6 ;  and  in  the  House  a  similar  resolution  defeated, 
was  passed  by  155  to  6;  not  voting  60. 

Subsequently  a  section  in  the  fourteenth  amendment 
to  the  Constitution  settled  the  question  in  the  following 
terms :  — 

"The  validity  of  the  public  debt  of  the  United  States, 
authorized  by  law,  including  debts  incurred  for  payment  of 
pensions  and  bounties  for  services  in  suppressing  insurrection 
or  rebellion,  shall  not  be  questioned.  But  neither  the  United 
States  nor  any  State  shall  assume  or  pay  any  debt  or  obligation 
incurred  in  aid  of  insurrection  or  rebellion  against  the  United 
States,  or  any  claim  for  the  loss  or  emancipation  of  any  slave  ;  but 
all  such  debts,  obligations,  and  claims  shall  be  illegal  and  void." 

On  February  19,  1869,  Congress  passed  an  act  pro- 
hibiting national  banks  making  loans  on  collaterals  of 
United  States  notes  or  national  bank-notes,  a  practice 
which  might  obviously  be  used  to  cause  a  considerable 
contraction  of  the  currency. 

A  bill  was  also  passed  on  March  3,  1869,  to  strengthen  Public  credit 
the  public  credit  by  a  declaration  of  the  purpose  of  the 
government  to  pay  bonds  in  coin,  and  legalizing  coin 
contracts,  as  recommended  by  McCulloch ;  but  Johnson 
refused  to  approve  it,  and  Congress  having  adjourned 
the  same  day,  it  failed  to  become  law. 


214  CONTEST  FOR  SOUND  MONEY 

In  his  inaugural  address,  on  March  4,  1869,  President 
Grant  said  :*— 

"  A  great  debt  has  been  contracted  in  securing  to  us  and  our 
posterity  the  Union.  The  payment  of  this,  principal  and 
interest,  as  well  as  the  return  to  a  specie  basis,  as  soon  as  it 
can  be  accomplished  without  material  detriment  to  the  debtor 
class  or  to  the  country  at  large,  must  be  provided  for.  To 
protect  the  national  honor  every  dollar  of  government  indebted- 
ness should  be  paid  in  gold,  unless  otherwise  expressly  stipulated 
in  the  contract.  Let  it  be  understood  that  no  repudiator  of 
one  farthing  of  our  public  debt  will  be  trusted  in  public  place, 
and  it  will  go  far  toward  strengthening  a  credit  which  ought  to 
be  the  best  in  the  world,  and  will  ultimately  enable  us  to 
replace  the  debt  with  bonds  bearing  less  interest  than  we  now 
pay." 

Boutweii's  George  S.  Boutwell  succeeded  McCulloch  as  Secretary 

taion.iniStra"     of  the  Treasury  in  March. 

Congress  was  called  in  extra  session  by  Grant  at  once, 
and  on  the  18th  of  March  the  act  to  strengthen  the 
public  credit,  already  referred  to,  became  law,  but  with- 
out the  coin  contract  clause.  It  declared  the  purpose 
of  the  United  States  to  pay  its  notes  and  bonds  in  coin 
or  the  equivalent,  solemnly  pledging  the  faith  of  the 
nation  to  such  payment,  and  "  to  make  provision  at  the 
earliest  practical  period  for  redemption  of  United  States 
notes  in  coin";  another  declaration  was  that  no  bonds 
would  be  paid  before  maturity  unless  greenbacks  were 
convertible  into  coin  at  the  option  of  the  holder  or  unless 
at  such  time  bonds  bearing  a  lower  rate  of  interest  could 
be  sold  for  par  in  coin. 

The  coin  contract  clause  was  stricken  out  by  a  vote  of 
82  to  56  in  the  House  and  28  to  15  in  the  Senate ;  the 
bill  passed  by  97  to  47,  and  42  to  13  respectively. 

It  should  be  borne  in  mind  with  reference  to  the  word 
"  coin  "  as  used  in  the  several  statutes  that  the  silver  dollar 


UNITED  STATES  LEGAL    TENDER  NOTES     21$ 

was  at  this  time  worth  in  the  market  about  4  per  cent 
more  than  the  gold  dollar. 

This  declaration  no  doubt  served  its  purpose  but,  as  Public  credit 
will  be  seen,  it  was  not  acted  upon,  so  far  as  notes  were  act  'S"0"5*1- 
concerned,  for  nearly  six  years,  and  not  actually  made 
effective  until  nearly  ten  years  thereafter.  Bonds  were 
in  fact  almost  immediately  "paid  before  maturity," 
although  the  sale  of  lower  rate  bonds  at  par  for  coin 
did  not  begin  until  1871.  The  volume  of  greenbacks 
remained  practically  undisturbed  at  $356,000,000  for 
nearly  five  years,  and  then  the  amount  was  not  reduced 
but  increased.  This  was  the  interpretation  given  the 
declaration  "  earliest  practical  period "  to  which  the 
faith  of  the  nation  was  pledged. 

The    Democratic    state   platforms    still   opposed  the  Opposition 
policy  above  outlined ;  that  of  the  Ohio  convention  of    eve  ops' 
July  7,  1869,  contained  the  following:  — 

"  Resolved,  That  exemption  from  tax  of  over  $2,500,000,000 
Government  bonds  and  securities  is  unjust  to  the  people,  and 
ought  not  to  be  tolerated,  and  that  we  are  opposed  to  any  ap- 
propriation for  the  payment  of  the  interest  on  the  public  bonds 
until  they  are  made  subject  to  taxation. 

"  That  the  claim  of  the  bondholders  that  the  bonds  which 
were  bought  with  greenbacks,  and  the  principal  of  which  is  by 
law  payable  in  currency,  should,  nevertheless,  be  paid  in  gold, 
is  unjust  and  extortionate,  and  if  persisted  in  will  force  upon 
the  people  the  question  of  repudiation. 

"  That  we  denounce  the  national  banking  system  as  one  of 
the  worst  out-growths  of  the  bonded  debt,  which  unnecessarily 
increases  the  burden  of  the  people  $30,000,000  annually,  and 
that  we  demand  its  immediate  repeal." 

That  of  Iowa,  a  week  later,  the  following :  — 

"That  we  favor  a  reform  in  the  national  banking  system 
looking  to  an  ultimate  abolishment  of  that  pernicious  plan  for 
the  aggrandizement  of  a  few  at  the  expense  of  the  many." 


2l6  CONTEST  FOR  SOUND  MONEY 

Boutweirs  It  soon  became  obvious  that  the  plan  of  the  new  ad- 

polQy-  ministration  differed  from  that  of  McCulloch  although 

officially  announcing  the  same  end  in  view,  resumption. 
For  while  both  Grant  and  Boutwell  urged  consideration 
of  the  subject  and  early  legislation  (but  with  due  regard 
for  the  "debtor  class"),  the  policy  carried  out  in  the  ab- 
sence of  legislation  was  to  reduce  the  debt,  under  the 
sinking  fund  law  of  1862,  thus  raising  the  national 
credit,  and  cause  a  change  in  the  trade  conditions  which 
would  bring  specie  into  the  country,  or  at  least  enable 
the  country  to  hold  part  of  its  own  product.  In  this 
manner  it  was  expected  that  coin  and  paper  would  come 
to  a  parity.  The  result  was  apparently  favorable,  as 
the  net  exports  of  specie  fell  off  more  than  50  per  cent. 
The  country's  stock  of  coin  was  increased,  and  although 
the  maximum  premium  for  coin  was  higher  than  in  the 
previous  year,  reaching  62^  per  cent,  the  minimum  was 
much  lower,  19^,  and  the  average  for  the  year  was  only 
33  against  39^  the  year  before.  The  average  value  of 
greenbacks  in  coin  thus  rose  to  75.2  per  cent.  Bout- 
well  redeemed  over  $75,000,000  of  bonds  in  nine  months, 
paying  for  them  in  coin,  thus  retiring  them  at  a  little 
over  88  per  cent. 

President    Grant   in    his  message,   December,    1869, 
said :  — 

Grant  on  the  "  Among  the  evils  growing  out  of  the  rebellion  and  not  yet 
currency.  referred  to,  is  that  of  an  irredeemable  currency.  It  is  an  evil 
which  I  hope  will  receive  your  most  earnest  attention.  It  is 
a  duty,  and  one  of  the  highest  duties,  of  government  to 
secure  to  the  citizen  a  medium  of  exchange  of  fixed,  unvarying 
value.  This  implies  a  return  to  a  specie  basis,  and  no  substitute 
for  it  can  be  devised.  It  should  be  commenced  now,  and 
reached  at  the  earliest  practical  moment  consistent  with  a  fair 
regard  to  the  interests  of  the  debtor  class.  Immediate  re- 
sumption, if  practicable,  would  not  be  desirable.  It  would  com- 
pel the  debtor  class  to  pay,  beyond  their  contracts,  the  premium 


UNITED  STATES  LEGAL   TENDER  NOTES     21 7 

on  gold  at  the  date  of  their  purchase,  and  would  bring  bank- 
ruptcy and  ruin  to  thousands.  Fluctuation,  however,  in  the 
paper  value  of  the  measure  of  all  values  (gold)  is  detrimental 
to  the  interests  of  trade.  It  makes  the  man  of  business  an 
involuntary  gambler,  for,  in  all  sales  where  future  payment  is  to 
be  made,  both  parties  speculate  as  to  what  will  be  the  value  of 
the  currency  to  be  paid  and  received.  I  earnestly  recommend 
to  you,  then,  such  legislation  as  will  assure  a  gradual  return 
to  specie  payments,  and  put  an  immediate  stop  to  fluctuations 
in  the  value  of  currency. 

"  The  methods  to  secure  the  former  of  these  results  are  as 
numerous  as  are  the  speculators  on  political  economy.  To 
secure  the  latter  I  see  but  one  way,  and  that  is,  to  authorize  the 
Treasury  to  redeem  its  own  paper,  at  a  fixed  price,  whenever 
presented,  and  to  withhold  from  circulation  all  currency  so 
redeemed  until  sold  again  for  gold." 

The  legal  tender  notes  were  treated  as  if  they  had 
"come  to  stay,"  their  ultimate  retirement  in  toto  was  no 
longer  considered,  and  the  newly  given  pledge  of  Con- 
gress to  make  the  notes  convertible  into  coin  before 
paying  off  bonds  not  due  and  payable  was  not  referred 
to. 

One  circumstance  remains  to  be  noted.  Although  The  green- 
the  act  of  1866  provided  that  greenbacks  were  to  be 
retired  and  cancelled  and  there  had  been  destroyed 
some  $77,000,000,  reducing  the  volume  to  $356,000,000, 
it  was  urged  that  since  the  maximum  issue  authorized  by 
the  act  of  June  30,  1864,  had  been  fixed  at  $400,000,000, 
and  the  act  not  repealed,  the  difference  between  that 
sum  and  the  existing  amount,  viz.  $44,000,000,  was  a 
"reserve"  available  to  the  Treasury.  Under  this  sup- 
posed authority  Boutwell  had  issued  in  1869  $1,500,000 
of  notes  from  the  "reserve,"  but  had  retired  them  again 
soon  thereafter.  This  remarkable  construction  of  the 
status  of  cancelled  and  retired  notes  subsequently  led  to 
actions  which  for  a  time  threatened  serious  results. 


serve. 


218  CONTEST  FOR  SOUND  MONEY 

Speculation  in  gold  was  very  active  during  the  year, 
at  one  time  in  midsummer  reaching  unprecedented  pro- 
portions. Unscrupulous  speculators,  believing  that  the 
Treasury  policy  of  not  selling  its  specie  would  render 
such  an  operation  easy,  undertook  to  "  corner "  gold, 
causing  serious  disaster  to  those  compelled  to  use  it; 
but  the  Treasury  did  sell  gold  in  time  to  avert  a  general 
panic.  Congress  ordered  an  investigation,  which  dis- 
closed a  thoroughgoing  conspiracy  in  which  several  per- 
sons supposed  to  be  close  to  the  administration  were 
implicated. 
Currency  Congress  on  July  14,  1870,  authorized  the  refunding 

resolutions  in       .      ,         -  .  ..  , 

Congress.  of  the  o  per  cent  bonds  into  5,  4|,  and  4  per  cents. 
Amendments  for  funding  the  greenbacks  into  bonds 
and  for  retiring  them  before  unmatured  bonds  were 
paid,  were  defeated,  and  also  one  to  scale  the  debt.  On 
February  14,  1870,  the  House  of  Representatives  voted 
that  the  business  interests  of  the  country  required  "  an 
increase  in  the  volume  of  circulating  currency,"  and 
favored  a  bill  "  increasing  the  currency  "  to  the  amount 
of  at  least  $50,000,000 ;  and  on  March  21  that  the  inter- 
est-bearing debt  "  should  not  be  increased  by  causing  a 
surrender  of  any  part  of  our  present  circulating  medium 
not  bearing  interest,  and  the  substitution  therefor  of 
interest-bearing  bonds." 

In  the  Senate  on  February  24,  1870,  the  following 
was  agreed  to  :  — 

"  Resolved,  That  to  add  to  the  present  irredeemable  paper 
currency  of  the  country  would  be  to  render  more  difficult  and 
remote  the  resumption  of  specie  payments,  to  encourage  and 
foster  the  spirit  of  speculation,  to  aggravate  the  evils  produced 
by  frequent  and  sudden  fluctuations  of  values,  to  depreciate  the 
credit  of  the  nation,  and  to  check  the  healthful  tendency  of 
legitimate  business  to  settle  down  upon  a  safe  and  permanent 
basis,  and  therefore,  in  the  opinion  of  the  Senate,  the  existing 
volume  of  such  currency  ought  not  to  be  increased." 


UNITED  STATES  LEGAL   TENDER  NOTES     219 

But  no  further  action  was  taken. 

On  July  12,  1870,  an  act  was  passed  to  retire  the  3 
per  cent  certificates  and  issue  $54,000,000  additional 
national  bank-notes,  an  amendment  to  retire  green- 
backs as  bank-notes  were  increased  being  voted  down. 

While  this  measure  was  under  discussion  the  antici-  Lega.\  tender 
pated   decision    of   the  Supreme    Court  that  the  legal 
tender  acts  as  applied   to    preexisting  contracts   were 
unconstitutional,  was  published. 

No  effort  was  made  by  Congress  or  the  administration 
to  conform  to  this  decision ;  on  the  contrary,  steps  were 
taken  to  secure  its  reversal. 

In  order  to  enable  banks  to  have  a  form  of  money  in 
large  denominations,  available  as  reserves  and  con- 
venient in  paying  large  sums,  Congress,  June  8,  1872, 
authorized  the  issue  of  certificates,  bearing  no  interest, 
for  deposits  of  greenbacks,  in  denominations  of  $5000 
and  $10,000.  These  were  issued  only  to  national  banks, 
were  payable  to  order,  were  counted  as  reserve,  and 
intended  to  be  used  in  settling  balances  at  clearing- 
houses. 

The  currency  question  played  a  subordinate  part  in  Currency  in 
the  presidential  contest  of  1872  (Grant-Greeley).     The 
platforms  of  the  two  parties  were  practically  identical. 
That  of  the  Republicans  contained  the  following :  — 

"  We  denounce  repudiation  of  the  public  debt,  in  any  form 
or  disguise,  as  a  national  crime.  We  witness  with  pride  the 
reduction  of  the  principal  of  the  debt,  and  of  the  rates  of  inter- 
est upon  the  balance,  and  confidently  expect  that  our  excellent 
national  currency  will  be  perfected  by  a  speedy  resumption  of 
specie  payment." 

The  Democratic-Liberal-Republican  platform  con- 
tained the  following :  — 

"  The  public  credit  must  be  sacredly  maintained,  and  we 
denounce  repudiation   in   every  form  and  guise.      A  speedy 


220  CONTEST  FOR  SOUND  MONEY 

return  to  specie  payment  is  demanded  alike  by  the  highest  con- 
siderations of  commercial  morality  and  honest  government." 

By  1872  there  had  been  a  large  increase  in  national 
bank-notes,  and  a  slight  increase  in  the  average  gold 
premium,  due  to  the  inflation,  had  appeared.  Boutwell 
held  that  Congress  and  the  country  were  opposed  to 
contraction,  so  that  the  only  alternative  to  bring  about 
resumption  was  to  await  the  increased  need  for  circula- 
tion by  the  natural  growth  of  population  and  business. 
Both  Grant  and  his  Secretary  occupied  an  "opportu- 
nist" attitude  toward  the  currency  during  his  first  term, 
in  strong  contrast  to  the  vigorous  sound  money  attitude 
of  McCulloch. 
Second  legal  The  second  decision  of  the  Supreme  Court  (reversing 
sion  the  former  decision),  published  early  in  the  year,  had 

declared  the  legal  tender  notes  constitutional.  The 
Court,  however,  seemed  to  base  its  approval  of  the  act 
upon  the  necessities  growing  out  of  the  war.  It  left  a 
doubt  as  to  whether  they  could  be  issued  in  time  of  peace 
and  in  the  absence  of  some  crucial  necessity. 

Boutwell  had  again  in  1872  issued  a  small  amount 
of  his  so-called  "  reserve  "  of  greenbacks.  This  led  to 
an  examination  of  the  question  by  the  Finance  Com- 
mittee of  the  Senate  early  in  1873.  Boutwell  justified 
the  issue,  but  Sherman,  speaking  for  the  committee, 
disagreed  with  him,  stating  that  greenbacks  once 
"  retired  and  cancelled,"  as  provided  by  the  act  of  1866, 
could  no  more  be  reissued  than  the  bonds  and  interest- 
bearing  notes  retired  and  cancelled  under  the  same  law. 
No  legislation  in  relation  to  the  matter  resulted. 

On  February  12,  1873,  the  act  revising  the  coinage 
laws,  which  eliminated  the  silver  dollar  and  made  the 
gold  dollar  the  unit  of  value,  was  passed.  This  is  fully 
discussed  in  another  chapter. 

Sherman  in  vain  endeavored  during   the  winter  of 


UNITED  STATES  LEGAL   TENDER  NOTES     221 

1 872-1 873  to  obtain  consideration  of  a  bill  providing  for 
resumption  by  January  1,  1874,  and  for  "free  banking." 

In  his  inaugural  address  in  March  Grant,  in  pledging  Grant's  sec- 
himself  to  a  programme  for  his  second  administration, 
included  as  one  feature  "  the  restoration  of  our  currency 
to  a  fixed  value  as  compared  with  the  world's  standard 
—  gold,  and  if  possible  to  a  par  with  it."  Economic 
conditions  had  now  reached  a  climax.  The  long- 
continued  period  of  speculation  and  inflation  had 
reached  a  limit.  Early  in  1873  the  coin  value  of  the 
greenbacks,  which  had  in  January,  1872,  risen  to  nearly 
92,  fell  below  85.  When  the  crop-moving  period  came, 
a  sharp  stringency  in  money  manifested  itself,  a  severe 
panic  involving  a  large  number  of  important  concerns 
and  spreading  over  the  entire  country  followed,  and 
since  the  government  was  the  creator  and  regulator  of 
the  country's  currency,  the  Treasury  was  naturally 
appealed  to  for  relief. 

William  A.  Richardson,  then  Secretary,  with  the  full  inflation  of 
approval  of  the  President,  purchased  bonds  with  a  large  *  73' 
part  of  the  so-called  greenback  reserve.  By  the  end 
of  December  he  had  added  $22,000,000  to  the  outstand- 
ing greenbacks  by  issuing  part  of  those  which  had  been 
"retired  and  cancelled"  by  McCulloch  under  the  act  of 
1866,  and  he  continued  the  policy  until  the  amount  so 
added  was  nearly  $29,000,000.  In  his  report,  rendered 
early  in  December,  no  mention  is  made  of  this  issue, 
but  the  purpose  to  make  use  of  the  "  reserve "  in  the 
absence  of  congressional  action  was  declared.  Richard- 
son pointed  out  the  total  absence  of  flexibility  in  the 
currency  as  an  evil  which  should  be  remedied,  and 
suggested  a  restricted  reserve  of  greenbacks  to  be 
used  in  emergencies  and  legislation  which  would  pro- 
hibit, or  at  least  restrict,  the  payment  of  interest  on 
deposits  by  the  banks. 


222 


CONTEST  FOR  SOUND  MONEY 


Grant  on 
elasticity. 


Congress 
stirred  to 
action. 


The  President  gave  the  currency  considerable  space 
in  his  message.  He  regarded  the  accumulation  of  gold, 
by  increasing  our  commodity  exports,  as  essential,  and 
for  this  purpose  the  industries  must  be  encouraged  by 
sufficient  currency;  not  inflation,  but  "just  enough," 
combined  with  elasticity.  "  The  exact  medium  is  specie. 
.  .  .  That  obtained,  we  shall  have  a  currency  of  an  exact 
degree  of  elasticity."  He  thought  the  panic  proved  the 
greenbacks  to  be  the  best  currency  "  that  has  ever  been 
devised,"  because  during  the  panic  they  were  hoarded 
like  gold.    In  his  opinion  the  currency  was  not  redundant. 

Whatever  else  may  be  said  of  the  discussions  of  the 
President  and  Secretary,  it  must  be  admitted  that  these 
and  the  panic  stirred  Congress  to  action.  The  House 
began  in  January,  1874,  consideration  of  measures, 
amending  the  currency  acts,  and  providing  for  free  bank- 
ing. The  latter  feature  will  be  considered  in  another 
chapter ;  those  relating  to  greenbacks  were  numerous  :  — 

1.  To  issue  notes,  payable  in  gold  in  two  years  from  date, 
at  the  rate  of  $4,000,000  monthly,  in  lieu  of  the  greenbacks. 

2.  To  apply  the  sinking  fund  solely  to  the  extinction  of  the 
greenback  debt. 

3.  As  national  bank-note  issues  increase  cancel  a  like  amount 
of  greenbacks,  down  to  $300,000,000. 

4.  To  issue  notes  and  3.65  bonds  interconvertibly,  limit  of 
notes  otherwise  to  be  $400,000,000. 

5.  Substitute  greenbacks  for  national  bank-notes,  redeeming 
the  5.20  bonds  on  deposit  to  secure  the  same,  in  such  notes. 

6.  Repeal  the  legal  tender  act,  to  go  into  effect  July  1,  1876, 
notes  to  be  funded  into  bonds. 


The  Senate  was  engaged  with   measures  of  similar 

inflation  bill,  scope  and  import.     A  bill  finally  passed  in  April  fixing 

the  maximum  amount  of  greenbacks  at  $400,000,000, 

and  national  bank-notes  at  the  same  amount.     The  vote 

was  29  to  24  (19  not  voting)  in  the  Senate,  140  to  102 


UNITED  STATES  LEGAL   TENDER  NOTES     223 

(48  not  voting)  in  the  House.  Congress  practically 
divided  geographically,  the  Eastern  members  being 
arrayed  against  the  bill,  with  Ohio  as  the  dividing  line. 
The  measure  was  known  as  the  "  inflation  bill,"  and  pub- 
lic meetings  were  at  once  held  to  denounce  it,  and  to 
influence  Grant  to  use  the  veto  power,  it  having  been 
reported  upon  good  authority  that  he  might  approve  the 
bill.  The  movement  was  successful,  and  the  veto  came 
April  22.  In  his  veto  message,  Grant  questioned 
whether  the  bill  would  actually  increase  the  currency, 
but  if  it  did,  it  must  be  regarded  a  departure  from  true 
principles  of  finance  and  the  pledges  made  by  Congress 
and  the  Executive.  Until  the  government  notes  were  inflation 
convertible  into  coin,  free  banking  would  not  be  safe,  and 
in  order  to  provide  for  such  convertibility,  the  revenues 
would  have  to  be  increased. 

A  second  bill  was  passed  June  20,  1874,  limiting  the 
maximum  of  greenbacks  to  #382,000,000,  and  providing 
for  the  redistribution  of  bank  issues  and  the  substitution 
for  the  reserve  required  on  circulation  of  a  5  per  cent 
redemption  fund  to  be  maintained  in  the  Treasury.  It 
also  authorized  the  retirement  of  circulation  by  deposits 
of  legal  tenders  with  the  Treasury.  The  Treasurer  was 
thereafter  required  to  redeem  all  national  bank-notes 
upon  presentation. 

The  congressional  elections  in  1874  changed  a  Repub- 
lican majority  of  no  into  a  minority  of  71.  No  doubt 
this  was  due  largely  to  "  hard  times,"  following  the  panic. 
It  certainly  roused  the  Republicans  and  inspired  them 
to  redeem  their  long-neglected  pledges. 

Benjamin  H.Bristow  followed  Richardson  as  Secretary  Bristow's 
of  the  Treasury  in  June,  and  proved  a  worthy  successor  flon< 
of  McCulloch  as  a  vigorous  champion  of  sound  finance. 
He  regarded  the  failure  to  provide  for   resumption  a 
breach  of  the  Nation's  pledges.  The  United  States  notes 


224  CONTEST  FOR  SOUND  MONEY 

were  merely  a  temporary  expedient,  warranted  only  by 
the  exigency  of  the  war.  Resumption  was  essential  to 
the  honor  of  the  government  and  the  general  welfare. 
To  accomplish  this,  contraction  was  necessary,  and  he 
recommended  legislation  which  would  fix  a  day  in  the 
near  future  when  the  notes  would  cease  to  be  legal  ten- 
der as  to  contracts  thereafter  made,  also  the  conversion  of 
the  notes  into  bonds  or  their  redemption  in  coin,  for  the 
acquisition  of  which  sales  of  bonds  should  be  authorized. 
Grant  also  adopted  stronger  language.  The  failure 
to  make  the  notes  equal  to  gold  was  not  honorable,  and 
it  should  be  no  longer  delayed ;  the  duty  to  act  rested 
with  Congress  ;  no  real  prosperity  could  be  expected 
unless  this  first  duty  was  attended  to.  He  recommended 
a  measure  removing  the  limitation  upon  the  volume  of 
national  bank-notes,  popularly  termed  "  free  banking." 
The  premium  on  gold  fluctuated  during  the  year  between 
I4§  and  9  per  cent,  averaging  ii^q,  and  giving  an  aver- 
age value  to  the  greenbacks  of  89.9. 
Resumption  The  Republicans  still  having  control  of  Congress  for 
the  short  session  endingMarch  3,  1875,  Sherman  immedi- 
ately prepared  a  bill  which,  while  by  no  means  as  satis- 
factory as  might  have  been  expected,  was  all  that  in  his 
opinion  Congress  would  assent  to.  It  provided  for  the 
retirement  of  the  fractional  currency  with  subsidiary  sil- 
ver coin  ;  the  repeal  of  the  gold  coinage  charge  ;  free 
banking  and  the  retirement  of  greenbacks  to  the  ex- 
tent of  80  per  cent  of  new  bank-note  issues,  until  the 
amount  of  the  former  was  reduced  to  $300,000,000 ;  the 
redemption  of  greenbacks  in  coin  on  and  after  January 
1,  1879;  authorized  the  use  of  the  surplus  coin  in  the 
Treasury  for  this  purpose  and  the  sale  of  bonds  without 
limit  to  provide  such  further  coin  as  might  be  needed. 
The  bill  was  reported  from  the  Finance  Committee  De- 
cember 2 1  ;  passed  the  Senate  December  22  by  a  vote  of 


act. 


UNITED  STATES  LEGAL    TENDER  NOTES     225 

32  to  14  (27  not  voting) ;  passed  the  House  January  7, 
1875,  136  to  98  (54  not  voting).  Not  one  Democratic 
vote  was  cast  in  favor  of  the  measure,  and  a  number  of 
the  extreme  sound  money  Republicans  in  the  House 
voted  against  it,  as  not  sufficiently  strong.  Grant 
approved  the  bill  January  14.1 

Thus  the  authors  of  the  legal  tender  acts,  nearly  a 
decade  after  the  disappearance  of  the  only  justification 
for  these  acts,  and  after  repeated  violation  of  pledges, 
finally  provided  for  convertibility  of  notes  into  coin  at  a 
fixed  date.  The  resumption  act  did  not  permit  the 
retirement  of  the  greenbacks  below  $300,000,000,  and 
was  cleverly  silent  upon  the  question  of  reissue  within 
the  limit,  but,  obviously,  the  intention  was  to  retain  the 
currency  in  use.  It  gave  the  Secretary  of  the  Treasury 
as  great,  if  not  greater,  powers  than  the  act  of  1866, 
against  which  Sherman  and  other  majority  leaders  had 
protested.  Conditions  made  this  necessary,  but  no  more 
in  1875  than  in  1866.  On  the  day  the  act  was  signed 
gold  closed  at  I2|  per  cent  premium. 

The  history  of  this  decade  is  but  a  repetition  of  the  Review 
experience  of  every  nation  with  fiat  money.  The  first  °Jioed 
step  taken,  the  rest  follows  easily  —  inflation,  delusion 
of  the  people,  breach  of  faith,  disaster.  Had  the  Nation 
been  actually  impoverished  so  that  recuperation  was 
long  and  tedious,  some  excuse  might  be  found  in  such 
conditions.  But  the  Nation  was  rich  enough  to  reduce 
its  debt  during  the  period  by  $650,000,000.  The  use 
of  one-third  of  that  amount  in  retiring  the  legal  tender 
debt  would  probably  have  brought  about  specie  pay- 
ments by  1870,  and  the  application  of  two-thirds  would 
have  extinguished  it  altogether.  This  would  have  given 
the  country  a  stable  currency,  would  have  raised  the 
credit  of  the  Nation  much  more  rapidly,  and  would  have 

1  See  Appendix. 


226 


CONTEST  FOR  SOUND  MONEY 


Unsound 
currency 
ideas 
dominated. 


Demand  for 
"  more 
money." 


saved  the  people  great  losses  due  to  depreciation  arising 
from  the  subsequent  troubles. 

The  political  leaders  were  "  opportunists,"  bent  upon 
retention  of  power,  and  willing  in  order  to  accomplish 
this  purpose  to  delude  the  people  with  the  false  notions 
of  wealth  engendered  by  such  a  currency.  Wittingly  or 
unwittingly,  these  leaders  helped  to  engraft  upon  the 
public  mind,  as  a  sound  economic  proposition,  the 
absurdity  that  a  currency  which  fluctuated  daily  and  on 
some  single  days  lost  a  tenth  of  its  purchasing  power, 
was  the  "  best  that  could  be  devised."  It  is  interesting 
to  note  that  the  surplus  gold  received  from  customs 
which  was  sold  by  the  government  at  a  premium  from 
1866  to  1876  exceeded  $500,000,000. 

The  strength  of  the  opposition  to  resumption  and 
retirement  of  the  greenbacks  was  located  south  of  the 
Potomac  and  west  of  the  Alleghanies,  and  the  reason  for 
this  was  the  same  which,  as  far  back  as  the  Jackson 
days,  operated  as  an  obstacle  to  sound  currency  legisla- 
tion, viz.  a  lack  of  adequate  banking  facilities,  adverse 
exchange  conditions,  and  much  higher  interest  rates. 
This  great  and  growing  agricultural  section  was  suffer- 
ing from  conditions  which  were  absent  in  the  eastern 
sections,  and  blindly  casting  about  for  a  remedy,  advo- 
cated "  more  paper  money."  They  thought  they  wanted 
more  currency ;  what  they  needed  was  more  capital. 
The  leaders  seemed  incapable  of  meeting  and  solving 
the  problem  thus  presented,  and  it  was  much  easier  to 
placate  the  people  with  more  or  less  inflation  than  to 
devise  legislation  which  would  actually  bring  relief. 

Having  in  mind  continually  the  facts  that  the  legal 
tender  notes  were  of  doubtful  constitutionality,  were  to 
be  but  a  temporary  expedient,  were  at  a  fluctuating  dis- 
count and  hence  a  delusive  measure  of  values,  the  lack 
of  wisdom  in  the  legislative  halls  is  illustrated  in  this 
brief  chronological  record  :  — 


UNITED  STATES  LEGAL   TENDER  NOTES     227 


Temporary   issue,    Chronology 
of  green- 
backs. 


1862,  February     .     $150,000,000  legal  tender   notes. 

fundable  into  bonds. 
July  .     .     .     $150,000,000  more. 

1863,  March    .     .     $150,000,000  more.     Funding  right  repealed. 

1864,  June      .     .     Limit  of    notes  $400,000,000,  and  $50,000,000  more 

for  reserve. 

1865,  December  .     Almost  unanimous  declaration  of  representatives   for 

contraction  looking  toward  retirement. 

1866,  April      .     .     Law  providing  for  contraction,  to  promote  specie  pay- 

ments. 

1868,  January      .     Contraction  suspended.   Volume  of  notes,  $356,000,000. 

1869,  March    .     .     Public  Credit  Act.     Notes  payable  in  coin  and  to  be 

made  so  before  bonds  are  redeemed. 

1869-1873  .  .  .  Hundreds  of  millions  of  bonds  redeemed.  Notes  still 
at  a  discount. 

1873,  December  .  Reissue  of  so-called  reserve.  Increasing  notes  to 
$382,000,000.  No  objection  from  Congress.  Re- 
sumption bill  defeated. 

1874  ....     Inflation  bill  passed  and  vetoed.     Act  fixing  maximum 

of  notes  at  $382,000,000. 

1875  ....     Resumption  act  passed.      Specie   payments  by  1879. 

Volume  of  notes  to  be  reduced  to  $300,000,000. 


STATISTICAL   RESUME 
National  Finances  (in  millions  of  dollars) 


Revenues 

Expenses 

-Def- 
icit 

+SUR- 
PLUS 

Debt 

Fiscal 
Year 

Customs 

Other 

Total 

Ordinary 

Interest 

Total 

Out- 
stand- 
ing 

+Inc. 
-Dec. 

1866  . 

1867  . 

1868  . 

1869  . 

1870  . 

1871  . 

1872  . 

1873  • 

1874  . 

1875  • 

179 
176 
164 
180 

'95 
206 
216 
188 
163 
157 

341 
287 
212 
I77 
20I 
168 
149 
134 

'37 
127 

520 
463 
376 

357 
396 
374 
365 
322 
300 
284 

386 
203 
230 
I90 
164 
158 

'S3 
180 
194 
172 

133 
144 
140 

131 
129 
126 
II7 

105 
107 
103 

519 

347 
37° 
321 

293 
284 
270 
285 
301 
275 

+  1 
+  Il6 

+  6 

+  36 

+  103 

+  90 

+95 

+  37 

—  1 

+  9 

2762 
2659 

2594 
254I 
2432 
2319 
2207 
2149 
2156 
2138 

+  8l 

-103 

-65 

-53 

—  109 

-"3 

—  112 

-58 

+  7 
-18 

228 


CONTEST  TOR  SOUND  MONEY 


Circulation 
(In  millions  of  dollars,  except  last  column) 


Fiscal 

Specie 

u.s 

Notes 

Bank- 

NOTES 

Frac- 
tional 
Cur- 
rency 

Total 

In 
Treas- 
ury 
(Paper 
only) 

In  Cir- 
cula- 
tion 

Popu- 
lation 

Per 

Year 

Nat'I 

State 

Capita 

1866 

25 

401 

281 

20 

27 

754 

81 

673 

35-5 

#18.99 

1867 

25 

372 

299 

4 

28 

728 

66 

662 

36.2 

18.28 

1868 

25 

356 

300 

3 

33 

717 

36 

681 

37-° 

18.39 

1869 

25 

356 

300 

3 

32 

716 

51 

665 

37-8 

17.60 

1870 

25 

356 

300 

2 

40 

723 

48 

675 

38.6 

»7-5P 

1871 

25 

356 

318 

2 

41 

742 

26 

716 

39-6 

18.10 

1872 

25 

356 

338 

2 

41 

762 

24 

738 

40.6 

18.19 

1873 

25 

356 

347 

I 

45 

774 

23 

751 

41.7 

18.04 

1874 

25 

382 

352 

I 

46 

806 

3° 

776 

42.8 

18.13 

1875 

25 

376 

354 

I 

42 

798 

44 

754 

44.0 

17.16 

The  Treasury  held  substantial  amounts  of  gold  and  the  banks  some,  but 
this  was  not  used  except  for  special  purposes.  The  amount  of  interest- 
bearing  notes,  not  included,  which  probably  circulated  during  the  earlier 
years  (1866-1868),  did  not  exceed  #25,000,000  to  $35,000,000. 


Exports  and  Imports 
(In  millions  of  dollars) 


Merchandise 

•  Specie 

Fiscal 
Year 

Exports 

Imports 

Excess 
+  Imports 
—  Exports 

Exports 

Imports 

Excess  of 
Exports 

1866 
1867 
1868 
1869 
1870 
1871 
1872 

1873 
1874 

1875 

349 
295 
282 
286 
393 
443 
444 
522 
586 
Sl3 

435 
396 
357 
417 
436 
520 
626 
642 
567 
533 

+  86 

-f  IOI 

+  75 

+  131 

+  43 

+  77 

+  182 

-f  120 

-19 

+  20 

86 
61 
94 
57 
58 
98 
80 

84 
66 

92 

II 

22 

14 
20 
26 
21 

14 
21 
28 
21 

75 
39 
80 

37 
32 

77 
66 

63 
38 
7i 

UNITED  STATES  LEGAL   TENDER  NOTES     229 
The  Gold  Premium  and  Prices 


Premium 
on  Gold 

Gold  Value 
of  Paper 

Gold1 
Prices 
U.S. 

Wages1 
in  Gold 

Purchas- 
ing 
Power 

of 
Wages 

Cost 

of 

Gold 

■     IN 

Labor 

High 

Low 

Aver- 
age 

High 

Low 

Aver- 
age 

1866 
1867 
1868 
1869 
1870 
1871 
1872 

1873 
1874 
187s 

67.8 
46.4 
50.O 
62.5 
23-3 
15-4 
15-4 
19. 1 
144 
17.6 

25-5 
32.0 
32.I 

'9-5 
1 0.0 

8.4 
8.5 
6.1 
9.0 
11.8 

40.9 
38.2 
39-7 
33-o 
14.9 
11. 7 
12.4 
13.8 
11. 2 
14.9 

78.6 
74-3 
74-4 
82.3 

90.3 
91-5 
91.7 
92.I 
91.2 
88.9 

66.O 
69.7 
68.7 
71.8 
82.4 
87.3 
874 
84.9 
89.I 
854 

7I.O 

72.4 
71.6 

75-2 
87.0 

89.5 
89.0 

87.9 
89.9 
87.0 

I34.O 
123.2 
125.6 
1 1 2.3 
1 19.0 
122.9 
121.4 
II4.5 
1 16.6 
1 14.6 

III. I 

I2I.8 

119.1 

123.5 
136.9 

150-3 
153-2 
147.4 

145-9 
140.4 

.971 
1. 129 
I.094 
I.232 
1. 28 1 
1-333 
I-367 
I-385 
I.348 
I.3I8 

.900 
.821 

.839 
.809 

•730 
.664 
.652 
.678 
.685 
.712 

1  Basis  of  100  for  i860. 

Sales  of  Gold  by  the  Treasury 
(Amounts  in  millions) 


Year 

Amount 

Pre- 
mium 

Aver- 
age 
Rate 

Year 

Amount 

Pre- 
mium 

Aver- 
age 
Rate 

1867.  .      . 

1868.  .      . 
1869  .      .      . 
187O .      .      . 
1871  .      .      . 

384 
54-2 
32.O 
65.I 
72.4 

I4.2 
21.9 
12.4 

15-3 
8.9 

37% 

41 

39 

24 

11 

1872  .     . 

1873  .     . 

1874  .     . 

1875  •     • 

1876  .     . 

77.6 
77.O 
38.0 

334 
26.2 

94 
1 1.6 

5-0 
4.0 

3-8 

12% 
15 
13 
12 

14 

Total  .     . 

5*4-3 

106.5 

21% 

CHAPTER  X 


1876  TO   I89O 


Resumption 
act  threat- 
ened. 


Repeal 
attempted. 


Resumption  of  specie  payments  had  been  decreed  by 
the  act  of  1875,  but  Western  Democrats  soon  began 
to  talk  of  repealing  the  act.  The  House  of  Representa- 
tives would  presently  be  organized  by  their  party  for  the 
first  time  since  the  outbreak  of  the  war.  It  proved, 
however,  that  almost  all  of  the  Eastern  members  of  that 
party  opposed  repeal,  while  a  substantial  number  of 
Western  Republicans  favored  it.  The  premium  on  gold 
rose  considerably  on  account  of  these  manifestations. 
It  reached  a  maximum  of  17I,  and  the  average  for  the 
year  was  14^-  per  cent,  lowering  the  average  value  of 
the  greenback  to  8y  compared  with  89.9  the  previous 
year. 

Bristow,  in  December,  1875,  reported  the  redemption 
of  nearly  $9,000,000  of  legal  tender  notes  under  the 
resumption  law,  but  insufficient  internal  revenues  com- 
pelled him  to  sell  gold  derived  from  customs,  thus  pre- 
venting its  accumulation  preparatory  to  resumption. 
The  national  banks  had  made  use  of  the  privilege  under 
the  recent  law  of  depositing  "  lawful  money  "  with  the 
United  States  Treasurer  to  retire  their  circulation,  to 
the  extent  of  over  $37,500,000,  so  that  there  was  an 
actual  contraction  going  on.  The  policy  of  paying  and 
retiring  the  government's  interest-bearing  debt  was  con- 
tinued during  the  year,  over  $30,000,000  of  the  revenue 
being  so  applied. 

A  number  of  bills  to  nullify  or  repeal  the  resumption 
law  were  presented  in  the  House  and  considered  by  the 
Banking  and  Currency  Committee,  but  the  presidential 

230 


UNITED  STATES  LEGAL   TENDER  NOTES     231 

contest  (of  1876)  was  at  hand,  and  the  Democratic  lead- 
ers were  cautious.  Repeated  attempts  to  have  the 
measures  brought  before  the  House  were  defeated  until 
August,  when  Cox  (New  York)  reported  a  bill  to  repeal 
the  clause  in  the  act  providing  for  redemption  of  United 
States  notes  in  coin  on  January  1,  1879,  which  passed, 
106  to  86(93  not  voting).  Only  11  Republicans  voted 
aye,  while  28  Democrats  voted  nay.  Upon  the  question 
of  repealing  the  entire  act  the  vote  was  11 1  to  158  (not  Repeal 
voting  20),  only  9  Republicans  voting  aye  and  61  Demo- 
crats nay.  Upon  the  proposition  that  the  Constitution 
did  not  confer  on  Congress  the  power  to  make  notes 
legal  tender  in  time  of  peace,  the  vote  was  97  to  146 
(46  not  voting);  only  9  Democrats  favored  and  1 1  Repub- 
licans opposed. 

A  Democratic  caucus  measure  proposed,  in  lieu  of  the 
resumption  law  of  1875,  an  accumulation  in  the  course 
of  ten  years  of  a  coin  reserve  by  the  government  and 
banks  equal  to  30  per  cent  of  the  notes  of  each.  It 
failed  to  pass  in  the  House,  the  vote  being  81  for,  157 
against. 

The  Republican  national  platform  of  1876  indorsed 
the  policy  of  resumption.  The  Democrats,  Tilden  be- 
ing their  candidate,  denounced  the  Republicans  for  the 
delay  in  bringing  about  resumption  of  which  they  had 
been  guilty,  and  declared  the  redemption  clause  of  the 
act  of  1875  a  hindrance  to  resumption. 

This  year  is  marked  by  the  separation  of  the  extreme  The  "Green- 
paper  money  advocates  from  the  two  main  parties  and  back"  Party' 
the  organization  of  the  "  Greenback  "  party  as  a  politi- 
cal force.  It  nominated  Peter  Cooper  for  the  presi- 
dency, demanded  the  repeal  of  the  resumption  act, 
favored  the  issue  of  legal  tender  notes  interconvertible 
to  and  for  3.65  per  cent  bonds,  the  abolition  of  bank  cur- 
rency, and  the  continuation  of  the  fractional  currency. 


232  CONTEST  FOR  SOUND  MONEY 

The  results  of  the  election  showed  that  the  people 
had  lost  confidence  in  the  Republican  party.  Their 
policy  lacked  the  vigor  of  sincerity  in  dealing  with 
monetary  affairs.  They  had  for  fifteen  years  controlled 
the  government  in  all  its  branches,  and  yet  had  failed  to 
redeem  their  pledges.  Their  reconstruction  policy  in 
the  South  evinced  a  desire  seemingly  to  build  up  and 
develop  a  political  force  rather  than  build  up  and  de- 
velop the  country  so  lately  devastated  by  war.  The 
result  of  the  election  was  close,  and  the  final  ascertain- 
ment and  counting  of  the  deciding  votes  subjected  our 
institutions  and  our  electoral  machinery  to  a  severe  strain. 
Congress  and  the  whole  country  as  well  were  absorbed  in 
the  controversy,  and  no  legislation  of  a  general  nature 
was  attempted. 

Under  the  process  of  redemption  under  the  act  of 
1875,  the  volume  of  legal  tenders  had  been  reduced  to 
$367,500,000.  New  bank  circulation  amounting  to 
$18,000,000  had  been  issued,  but  the  banks  had  at  the 
same  time  retired  circulation  to  the  net  amount  of 
$29,100,000.  The  premium  on  gold  averaged  \\\  per 
cent  for  the  year.  The  relative  commercial  value  of 
Silver  agita-  gold  and  silver  was  gradually  changing.  In  1873  the 
market  value  of  the  silver  dollar  was  about  3  per 
cent  greater  than  the  gold  dollar,  and  this  fact  explains 
the  ease  with  which  the  demonetization  law  passed 
Congress.1  Gold  was  the  cheaper  metal,  and  legislators 
seem  prone  to  favor  the  standard  which  tends  toward 
the  greater  volume  of  money.  The  greater  relative 
production  of  silver  had  changed  the  relative  price,  and 
the  privilege  of  free  coinage  of  silver  would  furnish 
silver  producers  a  steady  market  for  their  product  at  a 
price  much  in  advance  of  its  commercial  value.  Their 
keen  sagacity  lost  no  time  in  seeking  through  Congress 

1  See  Chapter  XII. 


UNITED  STATES  LEGAL   TENDER  NOTES     233 

to  remonetize  the  silver  dollar.  The  proposition  was 
well  received  by  the  general  public,  who  had  since  1834 
known  silver  as  an  appreciated  and  not  a  depreciated 
metal.  The  lower  House  voted  to  remonetize  silver  167 
to  53,  and  from  this  Congress  dates  the  birth  of  the 
silver  party,  destined  to  play  such  an  important  part  in 
fiscal  and  monetary  affairs  during  the  ensuing  quarter 
of  a  century. 

President  Hayes  in  his  inaugural,  March  4,  1877, 
briefly  but  firmly  supported  resumption.  He  appointed 
John  Sherman  Secretary  of  the  Treasury,  and  plans 
were  at  once  matured  to  insure  the  successful  execution 
of  the  resumption  law.  In  Congress  the  House  was 
again  Democratic,  although  by  a  smaller  majority,  —  20. 
In  the  Senate  the  Republicans  had  only  38  votes  to  37 
Democrats  and  1  independent,  David  Davis  (111.),  here- 
tofore a  member  of  the  Supreme  Court. 

Ewing  (Dem.,  O.)  at  once  introduced  in  the  House  a  Resumption 
bill  to  repeal  the  resumption  clause  of  the  act  of  1875,  attacked! 
and  reported  it  favorably  from  the  Banking  and  Cur- 
rency Committee  October  31.  Fort  (Rep.,  111.)  pre- 
sented a  measure  for  the  same  purpose  differently 
worded,  which  latter  measure  passed  November  23,  by 
a  vote  of  133  to  120,  27  Republicans  (practically  all 
Western  men)  voting  for  it  and  as  many  Democrats, 
from  the  East,  against  it.  Among  the  Democrats 
favoring  the  measure  was  Carlisle,  afterwards  Secre- 
tary of  the  Treasury ;  voting  against  it  was  Foster,  also 
later  Secretary.  The  bill  went  to  the  Senate,  but  re- 
mained in  the  Finance  Committee  until  April  17,  1878. 

In  December  Sherman    reported  favorable  progress  Sherman's 
in  refunding  the  debt  and  the  sale  of  bonds  to  procure  ^0nninistra" 
gold  for  resumption  purposes.     The  premium  on  gold 
had   fallen    so   that   notes   were   worth  97I    per   cent. 
The   outstanding    legal   tenders  had   been    reduced   to 


234  CONTEST  FOR  SOUND  MONEY 

^351,300,000.  The  trade  balance  continued  favorable, 
helping  him  to  secure  gold.  He  urged  a  firm  mainten- 
ance of  the  resumption  policy  —  to  reverse  it  would  im- 
pair the  public  credit.  It  will  be  remembered  that  under 
the  act  of  1875,  as  new  national  bank  circulation  was 
taken  out  United  States  notes  were  to  be  retired  to  the  ex- 
tent of  80  per  cent  of  such  amount.  He  anticipated  that 
bank-notes  would  not  be  taken  out  in  sufficient  volume 
to  reduce  the  United  States  notes  under  the  80  per 
cent  proviso  to  the  minimum  of  $300,000,000,  hence  he 
recommended  funding  the  excess  into  bonds,  or  if  the 
silver  dollars  were  remonetized,  these  might  be  used  for 
that  purpose. 

He  said  that  the  act  of  1875  did  not  clearly  state 
whether  the  notes  redeemed  after  1879  might  be  reissued, 
but  he  thought  they  might  be.  "  A  note  redeemed  in  coin 
is  in  the  Treasury,  and  subject  to  the  same  law  as  if 
received  for  taxes  or  as  a  bank-note  when  redeemed  by 
the  corporation  issuing  it."  He  thought  it  well  to  settle 
the  question  by  legislation,  as  his  views  were  contro- 
verted. This  would  involve  the  question  of  making  the 
notes  permanent  currency,  and  he  used  all  the  old  argu- 
ments in  favor  of  doing  so  with  or  without  the  legal 
tender  quality. 

He  remarked :  — 

Sherman  on  "The  Secretary  ventures  to  express  the  opinion  that  the 
greenbacks.  best  currency  for  the  people  of  the  United  States  would  be  a 
carefully  limited  amount  of  United  States  notes,  promptly  re- 
deemable on  presentation  in  coin,  and  supported  by  ample 
reserves  of  coin,  and  supplemented  by  a  system  of  national 
banks,  organized  under  general  laws,  free  and  open  to  all,  with 
power  to  issue  circulating  notes  secured  by  United  States  bonds 
deposited  with  the  government,  and  redeemable  on  demand 
in  United  States  notes  or  coin.  Such  a  system  will  secure  to 
the  people  a  safe  currency  of  equal  value  in  all  parts  of  the 
country,  receivable  for  all  dues,  and  easily  convertible  into  coin. 


UNITED  STATES  LEGAL    TENDER  NOTES     235 

Interest  can  thus  be  saved  on  so  much  of  the  public  debt  as 
can  be  conveniently  maintained  in  permanent  circulation,  leav- 
ing to  national  banks  the  proper  business  of  such  corporations, 
of  providing  currency  for  the  varying  changes,  the  ebb  and  flow 
of  trade." 

National  bank-note  issues  had  diminished  in  volume, 
and  the  fractional  currency  had  been  practically  replaced 
by  silver  coin.  The  economic  conditions  of  the  country 
were  still  unsettled,  and  as  usual  this  was  charged  to  the 
policy  of  currency  contraction,  the  resumption  law  being 
especially  attacked. 

We  have  seen  that  by  the  aid  of  a  few  Republican  RePeal  de- 
votes the  bill  to  repeal  the  resumption  act  passed  the 
House.  In  the  Senate,  on  April  17,  1878,  it  was  re- 
ported by  Ferry  (Rep.,  Mich.)  with  a  substitute  making 
United  States  notes  receivable  in  payment  or  redemp- 
tion of  bonds,  and  after  October  1,  1878,  for  customs, 
and  providing  that  the  volume  in  existence  at  that  date 
was  to  be  the  permanent  volume  and  reissuable.  By  a 
vote  of  30  to  29  this  was  substituted  for  the  House  bill, 
and  then  passed  by  the  Senate  by  45  to  15.  Ten  Demo- 
crats voted  against  the  House  bill  and  9  Republicans 
voted  for  it. 

The  House  had  tired  of  waiting  for  the  Senate,  and  Contraction 

suspended. 

on  April  29  passed  a  bill  introduced  by  Fort  (Rep.,  111.) 
to  suspend  the  cancellation  of  redeemed  United  States 
notes,  and  directing  their  reissue.  The  vote  stood  177 
to  35,  the  negative  vote  including  only  7  Democrats. 
Only  the  strongest  representatives  could  resist  the  tide; 
Foster  and  McKinley  voted  for  it  and  Garfield  against 
it.  The  Senate  passed  this  bill  May  28  by  a  vote  of  41 
to  18,  having  first  rejected  Bayard's  amendment  that 
such  reissued  notes  were  not  to  be  legal  tenders.  The 
affirmative  vote  included  Blaine,  Davis,  and  Windom  ; 
the    negative    Bayard,    Conkling,    Hoar,    and    Morrill. 


236 


CONTEST  FOR  SOUND  MONEY 


Silver  certifi- 
cates. 


Resumption 
effected. 


Generally  speaking,  the  negative  vote  was  from  the 
Eastern  states.  Sherman  favored  the  measure,  and  hence 
Hayes  approved  it  on  May  3 1  without  a  protest.  The 
volume  of  notes  then,  as  to-day,  was  $346,681,016. 

Thus  Republican  votes  assisted  the  Democrats  in 
emasculating  the  measure  to  which  the  former  had 
"pointed  with  pride,"  in  the  previous  campaign  platform. 
A  veto  by  Hayes,  in  the  face  of  the  overwhelming  votes 
in  both  houses  of  Congress,  would  very  likely  have  been 
overridden.  It  is  obvious  that  the  approval  of  this 
act  was  contrary  to  his  convictions,  and  that  but  for 
Sherman's  leanings  to  the  policy  of  continuing  the 
United  States  notes  as  a  permanent  part  of  our  currency, 
our  financial  history  might  have  been  altered  by  a  vig- 
orous veto  of  this  reactionary  measure. 

Congress  on  February  28,  1878,  passed  the  act  re- 
monetizing  the  silver  dollar  over  the  veto  of  the  Presi- 
dent. (Discussed  in  another  chapter.)  Silver  certifi- 
cates were  also  provided  for  in  this  act.  The  silver 
movement  developed  rapidly  in  both  parties  during 
1 877- 1 878.  The  "  Greenback  "  party  had  conventions  in 
many  of  the  states  and  controlled  a  substantial  vote.  It 
had  become  a  force  in  certain  sections,  and  each  of  the 
old  parties  shaped  platforms  to  gain  its  support,  as  well 
as  that  of  the  silver  advocates.  The  election  of  1878 
gave  the  Democrats  the  House  by  a  majority  of  19,  and 
the  cooperation  of  16  Greenbackers.  The  Senate  be- 
came Democratic  by  12  majority. 

Despite  all  these  political  machinations  against  the 
gold  standard  and  resumption,  gold,  which  in  January 
stood  at  102,  fell  below  101  in  April,  and  never  there- 
after reached  that  figure.  In  December  it  was  but  -fa 
of  1  per  cent  premium,  and  resumption,  so  far  as 
equality  of  notes  and  gold  was  concerned,  was  practi- 
cally  accomplished.       Many   there   were,    even   astute 


UNITED  STATES  LEGAL   TENDER  NOTES     237 

bankers,  who  believed  even  in  December,  1878,  that  re- 
sumption would  fail ;  but  Sherman  had  made  adequate 
preparation,  and  the  economic  conditions  had  grown 
month  by  month  more  favorable  to  his  plans.  As  stated 
officially  in  his  report  in  December,  1878,  Sherman  had  Sherman's 
acquired  a  gold  fund  of  over  $133,000,000,  of  which 
$96,000,000  had  been  derived  from  bond  sales,  the  bal- 
ance from  surplus  revenues,  the  income  of  the  gov- 
ernment having  improved  as  "hard  times"  passed. 
He  had  suspended  the  issue  of  gold  certificates;  had 
arranged  that  the  Treasury  use  the  New  York  clearing- 
house to  facilitate  and  cheapen  the  collection  and  pay- 
ment of  checks  and  drafts,  with  only  partial  use  of  cash, 
at  the  point  where  three-fourths  of  his  payments  were 
made ;  had  concentrated  his  coin  in  New  York,  where 
alone  under  the  act  of  1875,  notes  could  be  presented 
for  redemption,  and  had  resolved  to  receive  the  legal 
tender  notes  for  customs  without  legislation  —  a  privi- 
lege he  could  in  the  absence  of  law  revoke  at  any  time. 
He  feared  that  a  law  making  United  States  notes  re- 
ceivable for  customs  would  deprive  the  government  of 
the  power  to  exact  coin,  and  might  prove  embarrass- 
ing if  an  emergency  arose.  He  expressed  the  view  that 
the  act  of  1878  prohibiting  further  cancellation  of  notes 
was  wise,  and  stated  his  purpose  to  pay  either  gold  or 
silver  in  redemption  of  notes,  as  preferred  by  the  holder, 
but  reserving  to  the  government  the  right,  which  it  had 
under  the  law,  to  pay  in  either. 

In  his  message  Hayes  recommended  that  no  financial 
legislation  be  undertaken  to  disturb  the  "  healing  influ- 
ences "  then  at  work.  The  House,  notwithstanding, 
took  up  the  amended  repeal  bill  of  the  previous  session, 
but  on  Garfield's  motion  it  was  "  laid  on  the  table,"  141 
to  no.  Only  5  Republicans  voted  favorably  to  the 
measure,  27  Democrats  against  it.    Thus  the  reactionary 


238 


CONTEST  FOR  SOUND.  MONEY 


Sherman's 
policy. 


Silver 

bullion 

notes. 


policy  was  definitely  checked.  At  this  time  the  frac- 
tional silver  coin  had  become  redundant,  and  by  the  act 
of  January  9,  1879,  its  redemption  in  "lawful  money" 
was  provided  for. 

Sherman  had  to  use  the  same  means  for  resumption 
proposed  by  McCulloch,  but  did  so  only  after  much 
shifting,  and  in  a  manner  which  after  all  left  much  of 
the  evil  unremedied.  While  his  remarkable  changes  of 
policy  served  to  delay  resumption,  it  should  be  borne  in 
mind  that  he  had  much  opposition  within  as  well  as 
without  his  party.  He  probably  went  as  far  in  support 
of  sound  finance  as  he  could  without  suffering  political 
defeat.  An  uncompromising  position  by  the  Republican 
party  in  favor  of  retiring  the  greenbacks,  or  redeeming 
them  in  coin  at  an  earlier  day,  would  doubtless  have 
resulted  in  placing  the  opposition  in  control.  In  view 
of  that  party's  attitude,  it  leaves  room  for  doubt  whether 
after  all  the  halting  and  vacillating  course  of  the  Repub- 
lican party,  typified  by  Sherman,  did  not  eventuate  in 
the  greater  good  to  the  country. 

No  disturbance  of  currency  conditions  appeared  for 
some  time  after  resumption.  Abundant  crops,  a  large, 
favorable  trade  balance,  larger  investments  by  foreigners 
in  our  securities,  caused  an  enormous  inflow  of  gold. 
The  refunding  of  the  debt  proceeded  rapidly.  Sher- 
man contracted  in  one  day  for  the  placing  of  nearly 
$150,000,000  of  bonds.  Even  the  issue  of  the  silver 
dollars  and  the  fall  in  their  commercial  value  could  not 
affect  the  progress  to  solid  prosperity,  and  the  Repub- 
licans naturally  took  credit  for  the  "  good  times  "  which 
resulted. 

A  bill  for  the  free  coinage  of  silver  passed  the  House 
in  May,  1879,  but  was  defeated  in  the  Senate.  The 
reason  for  referring  to  it  here  is  to  recall  one  section 
(introduced  by  Ewing,  Dem.,  O.),  proposing  that  the 


UNITED  STATES  LEGAL   TENDER  NOTES     239 

government  buy  bullion  at  market  price,  issue  certificates 
against  the  same,  and  retain  only  40  per  cent  of  the 
dollar  coined  from  the  bullion  as  a  reserve  for  their 
redemption.  This  passed  106  to  105,  Speaker  Randall 
voting  aye ;  only  2  Republicans  voted  for,  and  12  Demo- 
crats against,  it.  A  subsequent  vote  eliminated  the  sec- 
tion from  the  bill. 

Political  conventions  of  the  opposition  still  declared 
resumption  a  failure,  in  the  local  campaigns  of  1879. 
Ewing,  the  author  of  the  repeal  bill,  candidate  for  gov- 
ernor of  Ohio,  was  badly  beaten  by  Foster,  and  the 
Democratic-Greenback  fusion  in  other  states  met  a 
similar  fate. 

Sherman  reported  in  December,  1879,  that  only  about  Sherman  on 
$11,000,000  of  notes  had  been  presented  for  redemption  ega 
in  coin,  and  the  Treasury  gold  stock  had  increased 
nearly  $20,000,000.  He  recommended  that  the  legal 
tender  proviso  as  to  greenbacks  be  repealed  as  to 
future  contracts,  letting  the  notes  sustain  themselves 
by  their  convertibility  into  coin  and  their  receivability 
for  public  dues.  Thus  the  question  of  the  constitution- 
ality of  making  the  reissued  notes  legal  tender  in  time 
of  peace,  now  before  the  courts,  would  be  finally  de- 
termined. 

The  free  banking  law  had  not  added  materially  to  the 
volume  of  bank-notes,  which,  as  Sherman  reported, 
stood  at  $337,000,000.  Thus  with  $305,800,000  esti- 
mated gold,  $121,400,000  silver,  and  $346,600,000  green- 
backs, the  supply  of  money  was  $  1 , 1 1 0,000,000.  Of  this 
amount,  averaging  nearly  $23  per  capita,  $260,000,000 
was  in  the  Treasury,  leaving  for  general  use  about  $17 
per  capita. 

In  his  message  Hayes  congratulated  Congress  on  the  Hayes  on 

urccnlj  n.cks 

successful  execution  of  the  resumption  act.  He  urged 
action,  however,  to  retire  the  greenbacks,  it  being  his 


240 


CONTEST  TOR  SOUND  MONEY 


The  Green- 
backers' 
platform. 


Election  of 
Garfield. 


conviction  that  the  issue  of  the  notes  was,  except  in 
extreme  emergency,  "  without  warrant  of  the  Constitu- 
tion and  a  violation  of  sound  principles." 

In  the  House,  in  April,  1880,  Weaver,  the  Greenback 
leader,  introduced  a  resolution  declaring  against  bank- 
notes and  favoring  the  substitution  of  legal  tenders, 
which  was  voted  down  85  to  117  (not  voting  90).  Only 
one  member  classed  as  Republican  voted  for,  and  29 
Democrats  against,  it.  The  resolution  also  favored  the 
coinage  of  more  silver  dollars,  and  their  use  in  redeeming 
bonds. 

In  the  presidential  contest  of  1880  Sherman's  chance 
for  the  Republican  nomination  was  clearly  destroyed  by 
his  unstable  record  on  the  money  question  prior  to  1877, 
but  the  dominating  influence  of  Ohio  was  so  great  that 
Garfield  obtained  the  nomination.  The  Republicans 
in  their  national  platform  made  no  promises  for  the 
future  as  to  the  currency,  and  seemed  content  to  rest 
upon  their  laurels.  The  Democrats  declared  for  "  honest 
money,  — gold,  silver,  and  paper  convertible  into  coin  on 
demand,"  and  the  strict  maintenance  of  public  faith. 
Tilden,  the  logical  nominee,  was  apparently  undecided 
as  to  acceptance,  owing  to  delicate  health,  and  General 
Hancock  became  the  nominee.  The  Greenback  party 
nominated  Weaver  as  its  candidate,  upon  the  platform 
which  embodied  his  resolutions  above  referred  to. 
Garfield  won  by  a  small  plurality  of  the  popular  vote, 
but  a  large  majority  in  the  electoral  college.  Weaver 
received  over  300,000  votes,  against  81,000  for  Cooper 
in  1884.  The  House  of  Representatives  elected  com- 
prised, Republicans  150,  Democrats  137,  Greenbackers 
10.  The  Senate  was  again  evenly  divided,  counting 
Davis  of  Illinois  against  the  Republicans. 

Sherman  in  December,  1880,  reported  that  only 
$706,658  notes  had  been  presented   for  redemption  in 


UNITED  STATES  LEGAL    TENDER  NOTES     24 1 

coin  during  the  year,  and  his  available  coin  was  over  Sherman  on 
$141,000,000,  a  portion  being  silver.  He  regarded  the  sreenbacks- 
notes  in  form,  security,  and  convenience  the  best  circu- 
lating medium  known  —  a  burdenless  debt.  He  con- 
cluded that  the  legal  tender  quality  was  not  necessary 
to  make  them  useful,  and  even  if  deprived  of  that,  they 
would  be  the  "  favorite  money  of  the  people."  Indeed 
he  regarded  the  currency  system  of  the  United  States 
the  best  ever  devised.  This  happy  but  short-sighted 
optimism  reads  strangely  in  the  light  of  the  calamity 
which  the  Nation  suffered  during  Cleveland's  second 
administration  on  account  of  this  "  favorite  money  of  the 
people." 

On  the  other  hand,  Hayes,  in  his  last  message,  reiter- 
ated that  the  notes  should  be  retired.  As  a  war  measure 
they  served  their  purpose,  but  their  indefinite  employ- 
ment was  not  warranted.  They  were  a  debt  and,  like 
any  other  debt,  should  be  paid  and  cancelled ;  their  re- 
tirement was  a  step  to  be  taken  toward  a  safe  and  stable 
currency.  How  statesmanlike  this  reads  in  contrast 
with  the  sentiments  of  his  shifty  Secretary ! 

The  greenback  agitation  had  given  way  to  that  for  Silver  infla- 
silver,  in  which  the  advocates  of  inflation  found  an  eas-  10n* 
ier  field  for  their  work.  The  silver  law  had  increased 
the  "  stock  of  money  "  by  nearly  $73,000,000,  but  only 
$45,500,000  in  dollars  and  certificates  were  in  circula- 
tion, the  remainder  being  in  the  Treasury,  a  useless  as- 
set. Sherman  had  indeed,  under  the  law  providing  for 
free  transportation  of  coin,  effected  a  larger  distribution 
by  offering  silver  payable  in  Western  and  Southern 
points  at  par  in  exchange  for  gold  in  New  York.  The 
continual  issue  of  silver  already  threatened  the  Treas- 
ury's reserves. 

Congress,  during  the  short  session  after  the  election, 
passed  a  bill  to  refund  the  5  per  cent  and  6  per  cent 


242  CONTEST  FOR  SOUND  MONEY 

bonds  maturing  in  1881  into  3  per  cents.  The  Republi- 
cans solidly  opposed  this  measure  because  the  new  bonds 
were  limited  in  amount  to  $400,000,000,  and  one  section 
of  the  bill  required  national  banks  to  use  them  exclu- 
sively as  security  for  circulation.  The  bill  also  author- 
ized the  temporary  use  of  the  coin  reserve  in  redemption 
of  bonds.  Hayes  vetoed  it  upon  the  "first-mentioned 
ground  on  the  last  day  of  the  session. 

Refunding  This  was  the  condition  when  William  Windom  suc- 

ceeded Sherman  in  March,  1881,  in  the  cabinet  of 
Garfield,  whose  untimely  death  prevented  him  from 
impressing  his  views  upon  the  legislation  of  that  period. 
Windom  remained  in  the  Arthur  cabinet  for  a  time,  and 
during  the  summer,  when  the  6  per  cent  and  5  per 
cent  bonds  matured,  was  able,  by  reason  of  the  general 
prosperity,  to  extend  the  most  of  them  at  3^-  per  cent, 
the  principal  payable  at  the  pleasure  of  the  govern- 
ment, which  proved  to  be  one  of  the  most  brilliant 
operations  in  our  financial  history.  The  amount  of 
bonds  maturing  at  that  time  was  $671,500,000,  of 
which  $597,800,000  were  "continued,"  the  remainder 
redeemed.  The  saving  of  interest  was  on  the  basis 
of  nearly  $10,500,000  annually,  and  the  cost  of  the 
operation  was  not  quite  $10,500. 

Windom  returned  to  the  Senate  in  November,  and  his 
place  was  taken  by  Charles  J.  Folger,  of  New  York, 
who  had  in  former  years  been  Assistant  Treasurer  in 
New  York  City. 

In  Congress  two  measures,  separately  introduced, 
finally  became  law  in  one  act, — the  extension  of  char- 
ters of  national  banks,  many  of  which  would  soon 
expire,  and  the  3  per  cent  refunding  bill.  The  opposi- 
tion to  the  former  measure  was  pronounced,  but  un- 

Actofi882.     availing.     This  is  known  as  the  act  of  July  12,  1882, 
and  beside  the  chief  features  named  above,  provided  for 


UNITED  STATES  LEGAL   TENDER  NOTES     243 

the  issue  of  gold  certificates,  making  them  receivable 
for  all  public  dues  ;  both  these  and  the  silver  certificates 
were  made  available  for  bank  reserves,  and  national 
banks  were  forbidden  to  be  members  of  any  clearing- 
house where  silver  certificates  were  refused  in  payment 
of  balances  (which  latter  proviso  was  particularly  directed 
against  the  New  York  clearing-house).  It  further  pro-  Gold  reserve 
vided  that  the  issue  of  gold  certificates  be  suspended 
whenever  the  gold  reserved  for  the  redemption  of  notes 
fell  below  $100,000,000,  the  first  legal  recognition  of 
the  necessity  of  the  "  reserve." 

At  this  time  it  was  estimated  that  the  stock  of  money 
in  the  country  amounted  to  over  $1,409,000,000,  of 
which  the  Treasury  had  $235,000,000.  The  stock  was 
composed  of  $506,700,000  gold,  $197,000,000  silver,  the 
fixed  amount  of  greenbacks  ($346,681,000),  and  nearly 
$359,000,000  of  national  bank-notes.  The  Treasury  had 
over  $35,000,000  in  silver  dollars  in  excess  of  certificates 
(hence  absolutely  unavailable)  and  was  coining  more. 

The  era  of  great  prosperity  was  on  the  wane,  but  so 
long  as  the  tide  was  favorable,  the  silver  inflation  at  the 
rate  of  nearly  $28,000,000  annually  was  not  generally 
marked.  A  combination  of  circumstances  again  gave 
the  Democrats  the  control  of  the  House  of  Representa- 
tives, this  time  by  a  plurality  of  seventy-seven.  Many 
states  that  had  been  strongly  Republican  reversed  their 
votes,  Massachusetts  electing  General  Butler,  now  a 
Greenback-Democrat,  governor,  by  a  handsome  plu- 
rality. 

In  the  year  1883  little  occurred  directly  affecting  the 
legal  tender  notes,  but  the  continued  increase  of  silver 
and  silver  certificates  began  to  show  serious  results. 
The  national  bank  currency  diminished,  and  greenbacks 
being  preferred  to  silver  were  held  back  from  the 
Treasury  in  payments.     The  government  had  to  use  its 


244  CONTEST  FOR  SOUND  MONEY 

gold  or  force  out  silver  only  to  have  it  return  after  a 
very  brief  circulation.  The  growing  fear  that  the  con- 
tinued purchase  and  coining  of  silver  would  eventually 
disturb  the  basis  of  values  was  accentuated  by  reac- 
tionary business  conditions,  which,  growing  in  intensity, 
resulted  in  a  sharp  stringency  in  the  money  market  in 
Crisis  of  May,  1884,  —  a  virtual  panic.  It  was  not  of  long  dura- 
l884>  tion,  in  its  intensity,  but  had  a  pronounced  effect  upon 

business  and  a  very  potential  influence  in  the  ensuing 
presidential  campaign.  During  the  panicky  period  the 
New  York  City  banks,  owing  to  the  contraction  of  their 
cash  reserves,  due  to  hoarding  money,  as  well  as  the 
general  drain  upon  their  resources,  used  a  device  which 
had  been  resorted  to  before  on  several  occasions,  to  pro- 
vide an  "  inter-bank  "  currency  for  the  purpose  of  settling 
Clearing-  debit  balances  at  the  clearing-house.  Loan  certificates 
cates6  Certl  were  issued  by  the  clearing-house  upon  deposits  of 
securities  by  banks  amounting  in  the  aggregate  to 
$24,915,000.  The  first  certificates  issued  bore  date 
May  15. 

It  was  at  this  time  that  the  Supreme  Court  decided, 
with  but  one  dissenting  voice,  that  the  power  to  issue 
legal  tender  notes  in  time  of  peace  as  well  as  in  time 
of  war  was  accorded  by  the  Constitution.  In  conse- 
quence, amendments  to  the  Constitution  prohibiting 
making  aught  but  gold  and  silver  legal  tender  were 
proposed,  but  not  acted  upon. 
Campaign  of  The  presidential  campaign  (Blaine-Cleveland)  was 
l884"  conducted  upon  lines  other  than  the  money  question. 

Both  parties  wished  to  appear  favorable  to  silver,  and 
both  protested  that  they  favored  sound  money,  the 
Republicans  calling  for  "the  best  money,"  the  Demo- 
crats for  "honest  money."  The  Greenback  party, 
nominating  General  Butler  for  the  presidency,  claimed 
that  the  Supreme  Court  had  upheld  their  chief  tenet, 


UNITED  STATES  LEGAL   TENDER  NOTES     245 

demanded  the  substitution  of  greenbacks  for  bank-notes, 
and  took  special  credit  for  forcing  remonetization  of 
silver  and  suspension  of  greenback  retirement,  the  two 
unsound  measures  of  1878. 

The  people  not  only  chose  Cleveland  President,  but 
a  House  of  Representatives  strongly  Democratic.  The 
Senate  continued  Republican.  The  Greenbackers  polled 
133,000  votes,  less  than  one-half  as  many  as  in  1880, 
and  thereafter  the  party  as  such  disappeared. 

Folger  died  early  in  1884,  was  succeeded  by  Gresham, 
previously  Postmaster-general,  who,  however,  remained 
but  a  few  months  at  the  head  of  the  Treasury,  resigning 
to  become  Circuit  Judge.  Arthur  then  turned  to  Hugh 
McCullochand  prevailed  upon  him  again  to  take  charge  of 
the  Treasury  Department  for  the  short  period  remaining 
of  his  administration.  With  a  gold  reserve  rapidly  di- 
minishing, silver  payments  appeared  at  several  times 
almost  inevitable.  The  supply  of  money  in  circulation 
was  estimated  at  $1,244,000,000,  giving  a  per  capita  of 
$22.65,  nearly  $6  more  than  in  1879. 

In  his  report  for  1884  McCulloch  asserted  that,  so  McCuiioch's 
long  as  the  government  issued  notes,  a  reserve  must  be  short  term" 
maintained,  and  correctly  forecast  the  future  in  these 
words  :  "  Many  persons  regard  legal  tender  notes  as  being 
money,  and  hold  that  no  means  should  be  provided  for 
their  redemption.  That  this  is  a  delusion  will  be  proven 
whenever  there  is  a  large  demand  for  gold  for  export. 
They  are  not  money,  but  merely  promises  to  pay  it,  and 
the  government  must  be  prepared  to  redeem  all  that 
may  be  presented,  or  forfeit  its  character  for  solvency." 

Silver  dollars  alone  were  really  available  in  substan- 
tial amounts,  but  for  these  there  was  no  demand. 
From  January  1  to  August  12  the  gold  had  dimin- 
ished $39,000,000,  and  the  silver  had  increased  by 
more  than  $21,000,000.    McCulloch  recommended  the 


246 


CONTEST  FOR  SOUND  MONEY 


Manning's 
administra- 
tion. 


Treasury 
conditions. 


retirement  of  all  notes  under  $10  to  increase  the  use  for 
silver  and  the  suspension  of  coinage  of  the  "  white  metal." 

Early  in  1885  McCulloch,  with  a  shrinking  gold  re- 
serve and  only  a  small  balance  of  greenbacks,  actually 
paid  the  clearing-house  at  New  York  silver  certificates. 
That  body  had  revoked  its  resolution  not  to  use  silver  in 
its  transactions  ;  but,  by  tacit  understanding,  no  member 
had  ever  tendered  silver  up  to  this  time.  Prompted 
by  a  request  not  to  embarrass  the  incoming  administra- 
tion, McCulloch  did  not  persist  in  this  policy. 

Daniel  Manning  became  Secretary  of  the  Treasury  in 
the  Cleveland  administration  in  March,  1885.  The  use- 
lessness  of  calling  Congress  in  extra  session  was  under- 
stood, and  measures  to  tide  over  the  dangers  from  inflation 
were  undertaken  by  the  executive  alone.  In  order  to 
conserve  the  gold  balance,  soon  reduced  to  $1 15,000,000, 
bond  purchases  were  for  a  time  suspended,  and  extraor- 
dinary efforts  were  made  to  put  silver  into  circulation. 
Under  his  discretionary  power  the  Secretary  discontin- 
ued the  issue  of  $1  and  $2  greenbacks  (silver  certificates 
were  then  limited  to  $10  and  upwards),  and  the  silver 
dollar  surplus  of  $71,000,000  was  somewhat  reduced. 
The  New  York  City  banks  exchanged  with  the  Treasury 
nearly  $6,000,000  in  gold  for  subsidiary  silver  coin. 

By  the  time  Congress  assembled  in  December,  1885, 
the  Treasury  was  in  much  better  condition,  but  still  un- 
safe so  long  as  the  laws  remained  unchanged.  Manning, 
in  his  report,  emphatically  attributed  the  danger  to  two 
laws, — the  silver  purchase  act  of  February,  1878,  and 
the  act  of  May,  1878,  suspending  the  retirement  of  green- 
backs, which,  he  said,  indefinitely  postponed  fulfilment  of 
the  solemn  pledge  of  the  public  credit  act  of  1869.  He 
earnestly  recommended  the  repeal  of  both  of  these  acts, 
but  his  argument  was  directed  particularly  against  the 
silver  law. 


UNITED  STATES  LEGAL   TENDER  NOTES     247 

Cleveland,  in  his  message,  devoted  special  attention  The  silver 
to  the  evil  of  the  silver  purchase  and  coinage  law,  by  anser- 
which  the  Treasury  was  compelled  to  pay  out  $2 7,000,000 
of  gold  annually  for  silver,  a  policy  which  would  soon 
bring  about  the  single  silver  standard.  Congress  was 
deaf  to  admonition.  A  provision  was,  however,  inserted 
in  one  of  the  appropriation  acts  (August  4,  1886),  author- 
izing the  issue  of  silver  certificates  in  denominations  of 
$1,  $2,  and  $5,  which  put  a  substantial  amount  of  silver 
into  use,  thereby  relieving  the  Treasury.  The  country 
was  also  recovering  rapidly  from  the  effects  of  the  de- 
pression following  the  panic  of  May,  1884.  Revenues 
increased,  and  so  did  the  surplus,  and  the  gold  reserve 
was  replenished. 

In  the  House  Morrison  (Dem.,  111.)  introduced  on 
July  14  a  resolution  directing  the  use  of  the  money  in 
the  Treasury  in  excess  of  $100,000,000  (including  the  Treasury 
gold  reserve)  in  buying  bonds  at  the  rate  of  $10,000,000  surpus- 
per  month.  McKinley  (Rep.,  O.)  proposed  an  amend- 
ment providing  that  the  $100,000,000  gold,  having  been 
accumulated  under  the  resumption  act  as  a  reserve  fund 
for  the  redemption  of  greenbacks,  be  maintained  for  that 
purpose,  and  not  otherwise  used.  This  was  defeated  by 
a  vote  of  1 19  to  1 54.  Only  five  Republicans  voted  against 
the  amendment,  and  13  Democrats,  chiefly  New  York 
members,  voted  for  it.  Morrison's  measure  passed  207 
to  67.  The  13  Democrats  again  voted  against  it,  but 
over  50  Republicans  voted  for  the  resolution.  Manning, 
to  whom  the  resolution  had  been  referred  for  his  opinion, 
expressed  himself  vigorously  against  it. 

The  Senate  amended  the  resolution  so  as  to  give  the 
Treasury  a  working  balance  of  $20,000,000,  and  author- 
ized the  President  to  suspend  the  operation  of  the  meas- 
ure in  case  of  exigency.  The  vote  was  42  to  20.  The 
negative  vote  included  Beck,  Ingalls,  Plumb,  Voorhees, 


248 


CONTEST  FOR  SOUND  MONEY 


Retirement 
of  notes 
advocated. 


Legal  tender 

proviso 

denounced. 


Wilson  of  Iowa,  and  others  favorable  to  the  "  more 
money"  policy.  The  House  agreed  to  the  amendments 
August  4 ;  but  as  Congress  adjourned  that  day,  and  the 
President  declined  to  sign  it,  the  measure  failed. 

In  his  report  for  1886  Manning  recommended  the 
application  of  the  large  and  growing  Treasury  surplus  to 
the  redemption  of  the  legal  tender  notes,  gradually 
substituting  the  silver  certificates  for  the  notes,  thus 
accomplishing  the  extinction  of  a  debt  actually  due 
without  contracting  the  currency,  and  at  the  same  time 
aiding  the  Treasury  in  putting  its  silver  funds  in  circula- 
tion. Discussing  the  decision  of  the  Supreme  Court,  he 
urged  that  the  power  of  making  the  notes  legal  tender 
was  not  exercised  "  in  relation  to  any  power  to  borrow 
money,"  for  money  is  the  standard  and  measure  of  the 
wealth  borrowed.  Changing  the  standard  in  the  act  of 
borrowing  was  "  cheating  or  enriching  the  lender. 
Such  proceedings  found  no  defender  among  the  lawyers, 
statesmen,  or  people.  .  .  .  Not  until  after  1 861,  when 
a  great  danger  had  beclouded  most  men's  perceptions 
of  financial  as  well  as  constitutional  law,  was  a  legal 
tender  money  made  out  of  the  debts  of  the  United 
States.  Not  until  the  infection  spread  was  it  ever 
deliberately  argued  that  any  representative  of  the  unit 
of  value  could  justly  be  suffered  to  be  made,  or  to  abide, 
in  permanent  depreciation  and  disparity  therewith." 

He  further  urged  that  whether  lawful  or  not  to  issue 
such  notes  after  redemption  and  twenty-one  years  after 
the  exigency  which  called  them  into  existence  had  passed, 
every  argument  now  forbade  the  continuance  of  the 
"  legalized  injustice."  If  the  power  had  been  conferred 
upon  Congress  by  the  Constitution,  it  should  now  be 
abrogated.  "  No  executive  and  no  legislature  is  fit  to 
be  trusted  with  the  control  it  involves  over  the  earnings 
and  the  savings  of  the  people." 


UNITED  STATES  LEGAL    TENDER  NOTES     249 

How  unfortunate  that  Manning's  recommendations 
were  not  adopted.  The  first  and  perhaps  the  greatest 
error  committed  in  our  financial  legislation,  after  the 
issue  of  the  legal  tender  notes,  was  the  repeal  of  the  law 
permitting  them  to  be  funded  into  government  bonds. 
This  closed  the  door  to  their  retirement  and,  in  the 
absence  of  affirmative  legislation,  left  them  as  a  perma- 
nent feature  of  our  currency  system. 

In  July,  1886,  the  silver  funds  in  the  Treasury  amounted 
to  over  $96,000,000,  the  gold  fund  had  reached 
$160,000,000,  and  the  outstanding  volume  of  national 
bank  circulation  was  $311,000,000.  The  per  capita 
circulation  was  about  $22.  Taxation  was  by  no  means 
burdensome,  and  yet  the  surplus  over  expenditure  was 
constantly  accumulating  in  the  Treasury.  The  people 
were  content  with  the  tax  budget,  and  certainly  no  more 
fitting  or  desirable  conditions  for  retiring  the  legal  tender 
notes  could  be  hoped  for.  The  sin  of  omission  on  the 
part  of  Congress  at  this  time  was  most  grievous. 

Manning  was  succeeded  by  Charles  S.  Fairchild  in  Fairchiid's 
1887.  The  growing  surplus  in  the  Treasury  had  ab-  tion 
sorbed  money  from  the  channels  of  circulation  to  such 
an  extent  as  to  embarrass  business  and  occasion  uneasi- 
ness. Fairchild  met  the  situation  and  established  the 
policy  of  depositing  receipts  from  internal  revenue  with 
designated  national  bank  depositories,  properly  secured 
by  United  States  bonds.  About  $40,000,000  of  the 
internal  revenue  was  thus  placed  instead  of  locking  up 
the  money  in  the  subtreasuries. 

The  year's  changes  in  the  Treasury's  cash  are  interest- 
ing. Nearly  $17,000,000  silver  funds  had  gone  into 
circulation,  in  addition  to  the  amount  coined  from 
monthly  purchases  of  silver  bullion,  the  minimum  of 
which  was  fixed  at  $2,000,000.  The  gold  fund  was  over 
$200,000,000.     The  outstanding  national  bank  circula- 


250  CONTEST  FOR  SOUND  MONEY 

tion  was  reduced  to  $279,000,000.  The  reduction  of  bank 
circulation  was  effected  chiefly  by  the  deposit  of  "  lawful 
money  "  with  the  Treasury  under  the  act  of  June  20, 
1874.  This  fund  in  the  Treasury  had  gradually  grown 
so  that  now  it  amounted  to  over  $100,000,000,  awaiting 
the  presentation  of  bank-notes  for  redemption. 

Cleveland  made  the  surplus  the  paramount  subject  of 
discussion  in  his  message  to  Congress.  Instead,  however, 
of  urging  retirement  of  greenbacks  with  the  unused  and 
unnecessary  funds  in  the  Treasury,  he  proposed  revision 
and  reduction  of  the  tariff  and  thereby  gave  to  the  Re- 
publicans an  issue  which  encompassed  Cleveland's  defeat 
in  the  ensuing  presidential  campaign. 
The  surplus  A  resolution  to  use  the  surplus  in  excess  of  $  1 00,000,000 
again  passed  the  House,  without  a  division.  The  form 
was  modified  from  that  of  the  previous  years  by  the 
insertion  of  the  words  "  not  otherwise  specially  reserved." 
In  the  Senate  it  came  up  early  in  1888  and  Plumb  (Rep., 
Kan.)  proposed  an  amendment  to  issue  in  lieu  of 
national  bank-notes  retired,  Treasury  notes  redeemable 
in  coin,  to  be  legal  tender  for  all  debts  public  and 
private.  The  redemption  fund  was  to  be  increased  pro 
rata  and  not  to  be  less  than  25  nor  more  than  30  per 
cent  of  the  outstanding  notes  of  both  kinds.  Morrill 
(Vt.)  moved  to  table  the  amendment,  which  was 
agreed  to  by  a  vote  of  23  to  22.  A  little  later  Plumb 
offered  the  same  proposition,  omitting  the  words  "  public 
and  private."  Morrill  again  moved  that  it  lie  on  the 
table,  which  was  defeated,  24  to  24,  and  the  Plumb 
amendment  as  modified  then  passed,  28  to  21.  Beck 
(Dem.,  Ky.)  proposed  an  amendment  directing  the 
purchase  of  silver  bullion  to  the  amount  of  national 
bank-notes  retired,  in  addition  to  the  purchases  under 
the  Bland  act,  the  bullion  to  be  coined  and  certificates 
issued,  as   provided   by   the   act   of    1878,    which  was 


UNITED  STATES  LEGAL   TENDER  NOTES     25 1 

carried  by  a  vote  of  38  to  13,  March  26,  1888.  Allison, 
Cameron,  Cullom,  and  thirteen  other  Republicans  voted 
for  it.  The  bill  failed  in  the  House.  These  proposed 
amendments  to  the  law  and  the  votes  thereon  are  interest- 
ing as  showing  at  a  very  recent  date  the  attitude  of  the 
two  great  parties  and  prominent  men  in  relation  to  green- 
backs, silver,  and  national  bank  circulation.  Cleveland's 
pronounced  and  somewhat  extreme  anti-protection  atti- 
tude upon  the  tariff  precipitated  many  speeches  in  Con- 
gress made  for  general  distribution  and  general  effect, 
and  roused  the  Republicans  to  press  forward  the  policy 
of  protection  as  the  cardinal  issue  before  the  people. 

For  the  time  being  the  money  question  again  took  Political 
subordinate  position  in  the  campaign.  The  platform  ofjggg; 
of  the  Republicans  indeed  declared  for  "  sound  money," 
both  gold  and  silver,  and  denounced  the  attempt  of  the 
Democrats  to  demonetize  silver.  The  efforts  of  both 
parties  in  turn  to  convince  the  silver  advocates  that 
"  Codlin,  not  Short "  was  their  friend,  is  rather  amus- 
ing. The  Democrats,  seriously  divided  between  the 
sound  views  of  the  eastern  wing,  which  was  in  posi- 
tion to  dictate  the  nominee  (Cleveland),  and  those  of 
the  western  wing,  which  was  for  "  more  money "  of 
any  kind,  —  paper  or  silver,  —  were  obviously  in  no  con- 
dition to  make  a  decisive  declaration.  Thus  the  tariff 
became  the  general  issue. 

The  Greenbackers  had  returned  to  their  respective 
affiliations,  but  there  were  evidences  that  a  third  party, 
formed  by  separation  of  dissatisfied  elements  from  both 
parties,  chiefly  in  the  agricultural  sections,  would  at 
an  early  day  bring  the  money  question  to  the  front. 
Cleveland  received  a  plurality  of  the  popular  vote  in 
November,  but  the  electoral  vote  went  to  Harrison,  Harrison 
the  House  also  becoming  Republican.  The  Senate  eecte  ' 
continued   Republican  by  two  majority. 


252  CONTEST  FOR  SOUND  MONEY 

Fairchild's  second  report  was  an  able  presentation  of 
the  financial  situation.  He  urged  reduction  in  taxation 
and  relief  from  the  danger  involved  in  the  continual 
purchase  and  coinage  of  silver.  Congress  had  granted 
authority  asked  for  to  purchase  unmatured  bonds  at  a 
premium  with  the  surplus,  and  this  resulted  in  a  ma- 
terial reduction  of  the  debt,  although  by  expensive 
means. 

The  net  silver  in  the  Treasury  had  been  reduced  to 
$54,000,000,  the  net  gold  remained  about  $200,000,000, 
and  public  deposits  in  national  banks  amounted  to 
$50,000,000.  The  "  lawful  money  "  fund  deposited  with 
the  United  States  Treasury  by  national  banks  for  the 
purpose  of  retiring  their  notes  stood  at  $86,000,000. 
windom's  Again  in  power  March  4,   1889,  in   both   houses  of 

second  term.  congress  an(}  t^e  Executive  Department,  the  Repub- 
licans were  bent  upon  aggressive  legislation.  Win- 
dom  was  appointed  Secretary  of  the  Treasury.  He 
continued  the  policy  of  reducing  the  debt  by  bond 
purchases,  diminishing  the  gold  fund  somewhat,  but 
the  silver  funds  even  more,  bringing  the  latter  down 
to  $32,000,000.  Under  the  pressure  of  these  issues 
national  bank-notes  were  retired  from  circulation  so 
rapidly  that  the  volume  fell  below  $200,000,000.  The 
silver  question  received  Windom's  special  attention. 
The  party  leaders  were  convinced  that  something  had 
to  be  done,  but  since  Cleveland  had  favored  the  sus- 
pension of  purchases  and  coinage  of  silver,  this  was 
His  silver  not  the  policy  to  be  adopted.  With  the  desire  to 
policy.  satisfy  both  the  agricultural  sections,  again  clamorous 

for  "  more  money,"  and  the  mercantile  communities, 
who  urged  the  suspension,  Windom,  after  an  elaborate 
discussion,  recommended  a  silver  measure,  which,  be- 
cause its  result  was  a  large  addition  to  the  volume  of 
legal  tender  paper,  will  be  outlined  here. 


UNITED  STATES  LEGAL   TENDER  NOTES     253 

He  proposed  to  "issue  Treasury  notes  against  de-  Treasury 
posits  of  silver  bullion  at  the  market  price  of  silver  tion. 
when  deposited,  payable  on  demand  in  such  quantities 
of  silver  bullion  as  will  equal  in  value,  at  the  date  of 
presentation,  the  number  of  dollars  expressed  on  the 
face  of  the  notes  at  the  market  price  of  silver,  or  in 
gold,  at  the  option  of  the  government,  or  in  silver 
dollars  at  the  option  of  the  holder  "  ;  and  to  repeal  the 
compulsory  feature  of  the  coinage  act  of  1878.  These 
notes  to  be  receivable  for  all  public  dues  the  same  as 
the  silver  certificates.  He  urged  that  this  would  give 
the  country  a  "  paper  currency  not  subject  to  undue 
or  arbitrary  inflation  or  contraction,  nor  to  fluctuating 
values,"  "  as  good  as  gold,"  "  an  absolutely  sound  and 
perfectly  convenient  currency  ...  to  take  the  place 
of  retired  national  bank-notes  .  .  .  meet  the  wants  of 
those  who  desire  a  larger  volume  of  circulation  .  .  . 
and  not  encounter  the  opposition  of  those  who  dep- 
recate inflation."  He  was  convinced  that  the  public 
sentiment  demanded  the  continued  use  of  silver  in  some 
form,  and  he  regarded  the  proposed  plan  as  the  least 
dangerous  form  of  so  doing. 

Windom's  course  in  the  Senate  showed  that  he  windom's 
was  a  follower  of  Sherman,  classifiable  as  a  moderate 
paper  money  man,  as  distinguished  from  the  inflationists 
like  Morton,  Logan,  and  Ferry.  He  would  no  doubt 
have  favored  the  soundest  system  of  money  had  it  been 
politic  to  do  so,  but  it  was  not,  in  his  judgment,  wise  to 
fly  in  the  face  of  the  people.  Few  men  could  have  so 
skilfully  devised  a  plan  calculated  to  satisfy  the  silver 
advocates,  the  Greenbackers,  the  gold  men,  and  the 
inflationists,  as  well  as  those  who  favored  contraction. 

The  plan  was  hailed  by  a  majority  in  Congress  as  a 
solution  of  a  troublesome  problem  which  the  legislators 
feared  to  undertake.     Nevertheless  they  were  not  satis- 


attitude. 


254  CONTEST  FOR  SOUND  MONEY 

The  law  of  fied  to  adopt  Windom's  plan  without  tinkering,  as  the 
law,  which  is  known  as  the  act  of  July  14,  1890,  shows. 
Congress  insisted  upon  making  the  notes  legal  tender, 
fixed  the  amount  of  silver  to  be  purchased  monthly,  and 
in  other  particulars  changed  the  plan.  In  addition,  the 
national  bank-note  redemption  fund,  now  amounting  to 
$54,000,000,  was  "  covered  into  the  Treasury,"  to  be 
used  as  an  asset,  the  obligation  to  redeem  the  bank- 
notes being  assumed  as  a  part  of  the  public  debt.  The 
ultra  silver  element  in  the  two  parties  was  sufficiently 
strong,  if  united,  to  pass  a  free  coinage  bill  had  this 
measure  been  defeated.  Indeed  the  Senate  had  passed 
such  a  bill  by  a  vote  of  42  to  25,  and  the  Democrats  in 
the  House  favored  it,  but  they  failed  to  obtain  the  sup- 
port of  the  silver  Republican  representatives. 

This  law,  popularly  called  the  Sherman  Act,  and 
fully  set  forth  in  the  discussion  of  silver  legislation  in 
another  chapter,  caused  inflation  of  the  currency  by 
about  $50,000,000  in  legal  tender  notes  annually,  with- 
out increasing  the  gold  reserve  fund.  At  the  same 
session  acts  were  passed  under  which  the  revenues  were 
reduced  by  over  $50,000,000,  largely  by  removing  the 
duty  on  sugar,  and  the  pension  disbursements  increased 
by  about  the  same  amount,  a  remarkable  trio  of  laws, 
after  a  long  period  of  inactivity  on  the  part  of  Congress. 

Review  The  popular  demand  for  "more  money,"  which  dur- 

ing this  period  influenced  political  leaders,  was  based 
upon  false  premises.  It  came  from  the  large  agricul- 
tural sections  and  less  developed  portions  of  the  country. 
Noting  these  vast  undeveloped  resources,  and  foreseeing 
the  fortunes  which  could  be  speedily  made  by  their 
rapid  development,  they  exerted  their  political  energies 
to  increase  the  volume  of  currency,  seemingly  expect- 
ing that  in  some  undefined  way  the  increase  would 
inure  to  their  benefit.     They  seemed  oblivious  to  the 


of  the  period. 


UNITED  STATES  LEGAL    TENDER  NOTES     255 

fact  that  however  great  the  volume  of  currency,  no  one 
could  receive  any  portion  of  it  except  by  giving  some- 
thing of  value  in  exchange,  either  labor  or  property. 
As  before  stated,  these  sections  needed  more  capital, 
not  more  currency. 

That  the  alleged  need  for  "  more  money  "  was  fictitious  Volume  of 
or  greatly  exaggerated,  is  demonstrated  by  the  fact  that 
the  national  bank  circulation  diminished  during  the 
decade  (1 880-1 890)  from  $359,000,000  to  $186,000,000. 
This  was  the  only  form  of  paper  money  which  was  to 
an  appreciable  degree  affected  as  to  volume  by  the 
demands  of  trade,  and  the  evidence  is  conclusive  that  it 
diminished  chiefly  because  there  was  no  legitimate 
demand  for  the  continued  large  volume.  The  reported 
gold  stock  showed  an  increase  of  $343,000,000,  and  the 
silver  supply  was  augmented  $310,000,000;  a  growth  of 
available  money  much  greater  than  the  increment  in 
population  and  trade,  for  the  amount  per  capita  of 
money  outside  the  Treasury,  was  in  1880  $19.41,  in 
1890  $22.82. 


256 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 
(Amounts  in  millions) 
National  Finances 


Revenue 

Expenses 

Debt 

Sur- 

Fiscal 

Year 

Ordi- 

plus 

Out- 

Customs 

Other 

Total 

nary 

Interest 

Total 

standing 

-  Dec. 

1876 

148 

142 

290 

165 

IOO 

265 

25 

2105 

-  33 

1877 

131 

!5° 

281 

144 

97 

241 

40 

2095 

—     IO 

1878 

130 

127 

257 

134 

103 

237 

20 

2150 

+  55 

1879 

137 

135 

272 

162 

io5 

267 

5 

2183 

+  33 

1880 

187 

147 

334 

169 

96 

265 

69 

2072 

—  in 

1881 

198 

163 

361 

177 

83 

260 

IOI 

1986 

-  86 

1882 

220 

184 

404 

187 

7i 

258 

146 

1820 

-166 

1883 

215 

183 

398 

206 

59 

265 

133 

1686 

-134 

1884 

195 

154 

349 

190 

55 

245 

104 

1586 

—  IOO 

1885 

181 

143 

324 

209 

51 

260 

64 

I540 

-  46 

1886 

193 

143 

336 

192 

5i 

243 

93 

1495 

-  45 

1887 

217 

*54 

37i 

220 

48 

268 

103 

1367 

-  128 

1888 

219 

160 

379 

215 

45 

260 

119 

I293 

-  74 

1889 

224 

163 

387 

24I 

41 

282 

105 

II7I 

—  122 

1890 

230 

173 

403 

262 

36 

298 

I(>5 

1067 

—  104 

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> 

(A 

u 

j  . 

2 

2 

< 

Fiscal 
Year 

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0 
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1/3 

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03 

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1876 

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27 

333 

370 

34 

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63 

727 

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$16.12 

1877 

25 

41 

317 

360 

20 

763 

41 

722 

46 

I5-58 

1878 

41 

6l 

324 

347 

l7 

790 

6l 

729 

48 

'5-32 

UNITED  STATES  LEGAL    TENDER  NOTES     257 


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(  Continued) 

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Year 

3a 

0  a 

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M 

M 
H 
2 

2 
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B 
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z 
0 

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a 

0 

< 
0 

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1879 

246 

41 

70 

347 

330 

IO34 

215 

819 

49 

^16.75 

1880 

35  2 

70 

73 

347 

344 

1 186 

212 

974 

50 

19.41 

1881 

478 

95 

74 

347 

355 

1349 

235 

1 1 14 

51 

21.71 

1882 

506 

123 

74 

347 

359 

I409 

235 

1 174 

52 

22.37 

1883 

542 

152 

75 

347 

356 

1472 

242 

1230 

54 

22.91 

1884 

546 

180 

75 

347 

339 

I487 

243 

1244 

55 

22.65 

1885 

588 

208 

75 

347 

319 

1537 

245 

1292 

56 

23.02 

1886 

59i 

237 

75 

347 

3" 

1561 

309 

1252 

57 

21.82 

1887 

654 

277 

76 

347 

279 

1633 

316 

1317 

59 

22.45 

1888 

706 

310 

76 

347 

252 

1691 

319 

1372 

60 

22.88 

1889 

680 

344 

77 

347 

211 

1659 

278 

1381 

61 

22.52 

1890 

695 

380 

77 

347 

186 

1685 

256 

1429 

63 

22.82 

Exports  and  Imports 


.  Merchandise 

Specie 

Year 

Excess 

Excess 

Exports 

Imports 

+  Imp. 
-Exp. 

Exports 

Imports 

+  Imp. 
-  Exp. 

1876 

540 

461 

-  79 

57 

16 

-41 

1877 

602 

45 1 

-151 

56 

41 

-15 

1878 

695 

437 

-258 

34 

3° 

-  4 

1879 

710 

446 

—  264 

25 

20 

-  5 

1880 

836 

668 

-168 

17 

93 

+  76 

l88l 

902 

643 

-259 

19 

no 

+  91 

1882 

751 

725 

-  26 

49 

42 

-  7 

1883 

824 

723 

—  IOI 

32 

28 

-  4 

1884 

741 

668 

-  73 

67 

37 

-3° 

1885 

742 

578 

—  164 

42 

43 

+  1 

1886 

679 

635 

-  44 

72 

39 

-33 

1887 

716 

692 

-  24 

36 

60 

+  24 

1888 

696 

724 

+  28 

46 

59 

+  13 

1889 

742 

745 

+  3 

97 

29 

-68 

1890 

858 

789 

-  69 

52 

34 

-  18 

258 


CONTEST  FOR  SOUND  MONEY 
The  Gold  Premium  and  Prices 


Premium  on  Gold 

Gold  Val.  of  Paper 

(A 

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U 

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a 

0 
0 

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1876 
1877 
1878 
1879 
1880 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 

15.0 
07.9 
02.9 

07.0 
02.5 
00.0 

11.5 
04.8 
00.8 

92.5 

97-3 
99-9 

87.4 
93-9 

97-5 

89.6 

95-5 
98.6 

108.7 
107.0 
103.2 

95° 
104.9 
108.4 
109. 1 
106.6 
102.6 
93-3 
93-4 

94-5 
96.2 

98.5 
93-7 

134.2 

135-4 
139.0 

139-4 
143.0 

I5°-7 
i52-9 
159.2 

I55-I 

155-9 
'55-8 
156.6 

157-9 
162.9 
168.2 

I.3IO 

I-3H 
1.366 

1-443 
I-383 
1.424 

1.438 
i-523 
I-523 
1.634 
1. 63 1 
1.627 
1. 621 
1.645 
1-757 

•745 
.738 
.719 
.717 
.699 
.663 

.654 
.628 
.644 
.642 
.642 
.638 

•633 
.614 

•594 

CHAPTER   XI 
The  Legal  Tender  Cases  in  the  Supreme  Court 

The  question  of  taxing  certificates  of  indebtedness  and  Legal  status 
legal  tender  notes  came  before  the  Supreme  Court  for  backs.6" 
review  on  writs  of  error  and  was  decided  in  1868.  The 
first-named  form  of  security  was  declared  not  subject  to 
municipal  taxation  in  the  case  of  Bank  of  New  York  vs. 
The  Comptroller  of  New  York  City  (7  Wall.  16)  and  the 
tax  was  declared  unconstitutional.  In  another  case, 
Bank  of  New  York  vs.  Supervisors  (7  Wall.  26),  it  was 
held  that  although  the  greenbacks  circulated  as  money, 
they  were  also  obligations  of  the  United  States,  and  hence 
not  taxable. 

Respecting  legal  tender,  it  was  held  in  The  County  of 
Lane  vs.  The  State  of  Oregon  (7  Wall.  71)  that  taxes 
laid  by  a  state  were  not  "  debts  "  within  the  meaning  of 
the  legal  tender  act.  In  Bronson  vs.  Rodes  (7  Wall. 
229)  it  was  held  that  an  express  contract  to  pay  coin 
was  not  dischargeable  with  legal  tender  notes,  one  jus- 
tice (Miller)  dissenting  from  the  decision. 

As  to  the  validity  of  the  act  of  Congress  taxing  state  state  bank- 

1    1 1  •    t  r  -n     %  note  tax- 

bank-notes  10  per  cent,  it  was  held  in  Veazie  Bank  vs. 

Fenno  (8  Wall.  533)  that  the  act  was  constitutional,  the 
federal  government  having  the  power  to  tax  out  of  exist- 
ence such  form  of  currency  in  order  to  make  room  for 
another  form  if  national  in  character.  Two  justices, 
Nelson  and  Davis,  dissented. 

It  was  also  held  that  the  shares  of  stock  in  a  national 
bank  were  subject  to  state  tax  even  though  the  entire 
capital  of  the  bank  were  invested  in  United  States  bonds. 

259 


260  CONTEST  FOR  SOUND  MONEY 

The  tax  was  held  to  be  in  the  nature  of  a  franchise  tax 
or  license  to  do  business,  and  hence  within  the  power  of 
the  state  to  impose. 

Historical.  The   main  question,  whether  the   legal   tender   acts 

themselves  were  constitutional,  did  not  come  before  the 
Supreme  Court  until  1867,  and  the  decision  was  not 
published  until  February  7,  1870.  (Hepburn  vs.  Gris- 
wold,  8  Wall.  603.)  Circumstances  attending  this  deci- 
sion and  its  subsequent  reversal  (Legal  Tender  Cases, 
1871,  12  Wall.  457)  caused  so  much  comment  at  the  time 
that  they  will  be  given  place  here. 

The  Court  in  1867  consisted  of  eight  members,  as  fol- 
lows :  Chief  Justice  Chase,  formerly  Secretary  of  the 
Treasury,  whom  Lincoln  appointed  in  1864  upon  the 
death  of  Chief  Justice  Taney,  and  who  had  for  some 
time  been  regarded  as  more  of  a  Democrat  than  a  Re- 
publican ;  Justices  Grier,  Nelson,  Clifford,  and  Field, 
looked  upon  as  Democrats ;   and  Justices  Miller,  Davis, 

Composition  and  Swayne,  regarded  as  Republicans.  An  act  of  Con- 
gress of  July  23,  1866,  provided  that  the  Court  be  reduced 
to  seven  members,  the  reduction  to  be  effected  by  not 
filling  the  next  vacancy  caused  either  by  death  or  retire- 
ment. While  the  first  legal  tender  case  was  pending,  a 
decision  against  the  validity  of  the  act  was  anticipated, 
and  an  act  was  passed  in  April,  1869,  to  take  effect 
December  1,  1869,  restoring  to  the  Supreme  Court  the 
previous  membership  of  nine.  It  was  expected  that 
Justice  Grier  would  soon  retire,  thus  enabling  the  ap- 
pointment of  two  justices  with  Republican  antecedents 
and  favorable  to  the  view  of  that  party  —  that  the 
greenbacks  were,   and  should  remain,  lawful  money.1 

The  case,  as  stated,  came  before  the  Court  in  1867, 
but  owing  to  its  importance  was  held  for  reargument 
until    1868,  and  was  actually  decided  November,   1869, 

1  Schuckers,  Life  of  Chase. 


SUPREME  COURT  ON  LEGAL    TENDERS       26 1 

by  the  expected  vote,  5  to  3.  The  form  of  the 
opinion  was,  as  is  the  custom,  submitted  to  conference 
and  adopted  January  29,  1870,  and  would  have  been 
published  two  days  later,  but  a  week  was  given  to  the 
dissenting  justices  (Miller,  Davis,  and  Swayne)  to  pre- 
pare their  views.1  On  February  1,  1870,  Justice  Grier 
retired,  and  on  the  14th  of  that  month  William  Strong 
of  Pennsylvania  was  appointed  in  his  stead  by  President 
Grant.  In  March  following  Joseph  P.  Bradley  of  New 
Jersey  was  appointed  to  fill  the  place  which  the  act  of 
April,  1869,  had  "revived."  Both  of  these  appointees 
were  known  to  favor  the  legal  tender  act,  Justice  Strong, 
when  on  the  bench  in  his  own  state,  having  written  an 
elaborate  opinion  declaring  it  constitutional. 

The  decision  in  Hepburn  vs.  Griswold  was  written  by  Hepburn  vs. 
Chief  Justice  Chase,  who  thus  passed  upon  the  validity  nswo  ' 
of  his  own  acts  as  Secretary  of  the  Treasury.  The  debt 
in  this  case  had  been  contracted  in  i860  and  fell  due 
February  20,  1862  (five  days  prior  to  the  approval  of  the 
legal  tender  act).  It  was  not  paid,  nor  was  payment 
tendered  until  March,  1864. 

The  opinion  held  that  the  act  by  its  terms  was  mani-  Chief  justice 
festly  intended  to  apply  to  all  debts,  those  contracted 
before  as  well  as  those  incurred  after  the  act  (from  this 
there  was  no  dissent) ;  that  therefore  the  act  impaired 
the  obligation  of  contract,  compelling  a  creditor  to 
receive  $1000  in  paper,  in  lieu  of  coin,  when  in  fact 
$1000  in  coin  was  at  the  time  equal  to  $2000  or  more 
in  paper,  and  thus  an  arbitrary  injustice  would  be  done. 
The  power  to  do  this  was  not  granted  by  the  Constitu- 
tion either  expressly  or  impliedly.  The  power  of  Con- 
gress is  limited  by  the  fundamental  law.  Not  only 
specifically  expressed  powers  may  be  exercised,  but  it 
was  within  the  power  of  Congress  by  implication  to 

1  Chase  in  the  dissent,  12  Wall. 


opinion. 


262 


CONTEST  FOR  SOUND  MONEY 


Power  of 
Congress. 


Dissenting 
views. 


employ  such  means,  not  prohibited  by  nor  repugnant 
to  the  Constitution,  as  were  necessary  and  appropriate 
to  execute  any  of  the  express  powers.  The  power  to 
determine  what  shall  be  legal  tender  is  a  governmental 
one,  and  in  the  United  States  vested  in  Congress  so  far 
as  relates  to  coins  ;  but  this  grant  of  power  does  not  carry 
with  it  that  of  clothing  paper  with  the  same  quality.  The 
emission  of  Treasury  notes  was,  as  a  form  of  borrowing, 
held  to  be  valid,  but  this  did  not  carry  with  it  the  power 
to  make  them  legal  tender.  Manifestly,  if  Congress 
were  clothed  with  power  to  adopt  any  and  all  means  it 
saw  fit  in  executing  the  express  powers  granted  by  the 
Constitution,  it  had  absolute  power,  which  was  not  con- 
sistent with  American  ideas  of  government. 

It  was  denied  that  giving  the  notes  legal  tender  power 
was  "appropriate"  or  "  plainly  adapted  "  to  the  purpose 
in  view.  It  did  not  save  them  from  depreciation  but  added 
to  the  long  train  of  evils  which  irredeemable  currency 
always  brings,  and  since  the  result  necessarily  was  an 
impairment  of  existing  contracts  and  also  the  taking  of 
private  property  (so  large  a  portion  of  which  consisted 
of  contracts)  without  due  process  of  law,  the  act  was 
inconsistent  with  and  prohibited  by  the  Constitution. 

In  dissenting,  Justice  Miller  urged  that  under  the  ex- 
press power  to  declare  war,  support  an  army  and  navy, 
borrow  money  and  pay  national  debts,  provide  for  the 
common  defence  and  general  welfare,  Congress  had,  in 
the  emergency,  no  other  recourse  to  save  the  govern- 
ment and  the  Constitution.  The  legal  tender  act  furnished 
the  means,  the  ordinary  use  of  the  government's  credit 
having  failed.  It  was  passed  reluctantly  only  after  it 
had  become  imperative.  That  if,  as  the  Court  had  just 
previously  ruled  (Veazie  Bank  case),  in  order  to  provide  a 
national  currency  either  by  means  of  government  notes 
or  national  bank-notes,  Congress  could  place  a  prohibi- 


SUPREME  COURT  ON  LEGAL   TENDERS       263 

tive  tax  on  state  bank-notes,  how  much  more  appropri- 
ate and  effectual  for  the  purpose  it  was  to  give  the  gov- 
ernment notes  legal  tender  power.  Undoubtedly  con-  Broad 
tracts  were  impaired,  but  the  states,  not  Congress,  were  t°™nnc~ 
prohibited  by  the  Constitution  from  enacting  laws  im- 
pairing the  validity  of  contracts.  National  bankruptcy 
laws  are  constitutional  although  they  clearly  impair  con- 
tracts. As  to  taking  property  without  due  process  of 
law,  the  legal  tender  act  does  so  indirectly,  but  so  do 
other  acts  for  great  national  purposes  —  the  tariff  laws, 
a  declaration  of  war,  additional  bond  issues  depreciating 
those  already  out.  Moreover,  by  declaring  the  act  void 
all  business  would  be  disturbed,  millions  of  dollars  sac- 
rificed, and  thus  great  injustice  done.  In  conclusion, 
the  choice  of  means,  the  degree  of  necessity,  lay  with 
Congress,  and  were  not  questions  for  the  Court  to 
determine. 

So  the  legal  tender  act  was  declared  unconstitutional. 
It  was  currently  reported  at  the  time  that  Chase,  Nelson, 
and  Clifford  held  that  the  act  was  void  for  all  purposes ; 
Grier  and  Field  only  as  to  preexisting  contracts.  The 
decision  occasioned  no  surprise  and  made  no  disturb- 
ance, as  it  was  confidently  believed  that  the  Court,  en- 
larged by  the  new  appointees,  would  reverse  the  decision 
when  occasion  arose.  The  occasion  was  not  long  delayed. 
In  the  December  term  of  1870  several  cases  came  up  and 
were  decided  in  May,  1871,  the  decision  being  published 
in  January,  1872.  The  public  expectation  was  realized,  The  reversal 
and  the  former  decision  reversed  by  a  vote  of  5  to  4.         of  l87I_l872> 

The  opinion  of  the  Court  was  written  by  Justice 
Strong,  a  concurring  opinion  by  Justice  Bradley,  and 
dissenting  opinions  were  filed  by  the  Chief  Justice, 
Justice  Clifford,  and  Justice  Field.  The  manner  in 
which  this  important  decision  was  brought  about  was 
severely  criticised  as  a  radical  departure  from  the  set- 


264  CONTEST  FOR  SOUND  MONEY 

tied  practice  of  the  Court,  and  it  was  reported  that,  for 
the  first  time  in  its  history,  heated  arguments  and  recrim- 
inations were  heard  at  its  sessions.1 

Justice  Strong  gave  as  a  reason  for  reopening  the 
question,  the  plea  that  the  Court  had  not  been  full 
when  Hepburn  vs.  Griswold  was  decided.  To  this 
Chase  replied  by  pointing  to  the  dates  (heretofore 
stated),  from  which  it  is  apparent  that  until  the  act  of 
April,  1869,  took  effect  (December,  1869),  the  Court  was 
full,  with  a  membership  of  eight,  and  would  have  been 
full  if  there  had  been  but  seven,  so  a  full  Court  heard 
and  decided  the  case.  The  form  of  the  opinion  was  not 
agreed  upon  until  after  December,  1869,  but  the  Court 
might  then  have  been  full  had  the  President  made  an 
appointment,  which  he  delayed  until  1870,  obviously  be- 
cause the  vote  would  still  have  been  against  the  validity 
of  the  act,  and  Justice  Grier  would  not  accommodate  the 
President  by  retiring  prior  to  the  filing  of  the  opinion, 
justice  The  revised  opinion  of  the  Court  stated  that  if  the 

United  States  could  not  in  any  emergency  make  Treas- 
ury  notes  legal  tender,  as  other  sovereignties  did,  the 
government  was  without  the  means  of  self-preservation. 
If  the  legal  tender  acts  were  held  invalid,  great  business 
derangement,  distress,  and  rankest  injustice  would  be 
caused,  since  almost  all  contracts  made  since  1862  were 
made  with  the  intent  to  discharge  them  in  legal  tender 
notes  which  have  become  the  universal  -measure  of 
values.  Debtors  would  have  a  large  percentage  added 
to  their  obligations.  No  distinction  could  be  made  as  to 
debts  preexisting.     The  act  affected  all  obligations. 

The  incompatibility  of  laws  with  the  Constitution 
must  be  plain  before  they  can  be  declared  invalid,  for 
the  presumption  was  in  favor  of  laws  of  Congress  being 
constitutional.     The  general    purpose  of  the  Constitu- 

1  Schuekers,  Life  of  Chase. 


SUPREME  COURT  ON  LEGAL    TENDERS       265 

tion  must  be  considered  and  the  intent  of  the  framers   Preservation 
discovered.     It  could  not  name  specifically  every  power  °  g°vem~ 

r  J  J     "  mentimpera- 

to  be  exercised,  and  the  manifest  object  being  to  estab-  tive. 
lish  a  sovereign  government,  every  means  not  prohibited 
could  be  employed,  especially  for  its  preservation. 
The  "  general  welfare "  clause  (Article  I,  Section  8) 
provides  for  that.  The  reasons  for  the  first  ten  amend- 
ments to  the  Constitution  were  clearly  to  prohibit  certain 
powers  supposed  to  be  deducible  from  the  original  doc- 
ument. If  then  the  object  were  one  for  which  the  gov- 
ernment was  framed,  the  means  conducive  to"  the  end 
were  to  be  determined  by  Congress,  if  necessary,  appro- 
priate and  not  prohibited,  nor  could  the  degree  of  ne- 
cessity be  reviewed  by  the  Court.  It  must  therefore  be 
clearly  shown  that  the  means  were  not  appropriate,  and 
due  weight  must  be  given  to  the  exigencies  of  the  case. 

At  the  time  of  the  passage  of  the  acts  the  Treasury 
was  empty,  the  credit  exhausted,  the  army  unpaid,  and 
the  existence  of  the  government  at  stake.  The  legal 
tender  notes  saved  the  country  from  disaster.  If  noth- 
ing else  could  have  saved  it,  no  one  would  question  the 
power  of  Congress  to  take  the  course  it  did.  Even  if  Congress  to 
other  means  might  have  been  employed,  the  Court  could 
not  therefore  interfere,  as  the  choice  lay  with  Congress. 
But  there  were  no  other  means.  The  then  head  of  the 
Treasury  Department  (Chase)  had  seen  no  way  to  avoid 
the  necessity. 

The  legal  tender  notes  having  proved  effective,  the 
act  must  have  been  appropriate  to  the  purpose.  And 
if,  as  had  been  admitted  in  the  Veazie  Bank  case,  Con- 
gress could  tax  state  bank  currency  to  enable  a  national 
currency  to  circulate,  it  could  certainly  choose  the  more 
direct  means  of  making  the  latter  legal  tender. 

To  the  objection  that  the  clause  authorizing  the  coin- 
age of  money  and  fixing  the  value  thereof  by  implica- 


determine 
means. 


266 


CONTEST  FOR  SOUND  MONEY 


Intent  of 
Constitution. 


Power  of 
Congress 
over  money. 


tion  excluded  the  power  to  make  paper  legal  tender, 
it  was  maintained  that  such  a  rule  of  construction  was 
out  of  harmony  with  the  entire  history  of  the  court; 
indeed  it  might  more  logically  be  held  that  as  the  states 
were  prohibited  from  making  aught  but  coin  legal  ten- 
der, it  was  intended  that  the  federal  government  should 
have  that  power  as  other  governments  had.  Whatever 
power  over  the  currency  existed  was  vested  in  Congress. 
If  the  power  to  declare  what  is  and  shall  be  money  is 
not  vested  in  Congress,  it  is  annihilated.  If  this  was 
intended,  would  it  not,  as  in  other  cases  where  govern- 
mental powers  were  prohibited,  have  been  definitely 
stated  ?  In  the  absence  of  such  a  prohibition,  is  it  not 
reasonable  to  say  that  it  was  intended  to  be  used  under 
the  grant  of  the  power  to  regulate  the  value  of  money  ? 

As  to  the  impairment  of  contract  obligations  by  the 
acts,  it  has  been  held  repeatedly  that  contracts  to  pay 
money  generally  are  obligations  to  pay  that  which  is 
money  when  payment  is  to  be  made.  The  coinage  law 
of  1834  changed  the  weight  of  gold  coins,  and  certainly 
could  not  be  held  unconstitutional.  It  was  denied  there- 
fore that  the  acts  did  impair  the  obligation  of  contracts, 
since  every  contract  to  pay  money  is  subject  to  the  consti- 
tutional right  of  Congress  over  money.  Congress  is  not 
prohibited  from  passing  such  a  law ;  both  expressly  and 
by  implication  is  the  power  given,  as  in  bankrupt  laws,  dec- 
laration of  war,  embargo  laws,  tariff  laws,  and  laws  chang- 
ing the  coinage.  All  take  from  the  worth  of  contracts 
and  indirectly  take  private  property,  but  they  are  part 
of  the  legitimate  governmental  functions  which  private 
contracts  cannot  defeat.  However  harsh  or  unjust,  these 
considerations  alone  do  not  make  them  unconstitutional. 

As  to  the  alteration  of  the  standard  of  value,  the  acts 
do  not  make  paper  a  standard  of  value.  It  is  not  claimed 
that  this  power  to  issue  rests  on  the  power  to  coin  money 


SUPREME  COURT  ON  LEGAL   TENDERS       267 

or  regulate  its  value.  It  is  not  asserted  that  Congress 
can  make  anything  which  has  no  value  money.  But 
Congress  has  the  power  to  enact  that  the  government's 
promise  to  pay  money  shall  be  money  for  the  time  being, 
equivalent  in  value  to  the  representative  of  value  deter- 
mined by  the  coinage  acts.  The  legal  tender  acts  fix 
no  standard  of  value,  nor  do  they  make  money  of  that 
which  has  no  intrinsic  value. 

In  dissenting,  Chief  Justice  Chase  asserted  that  it  was  Chase's 
the  plain  duty  of  the  Court  to  declare  unconstitutional  v|^esntmg 
any  act  of  Congress  not  made  in  the  exercise  of  express 
power,  or  coming  within  Marshall's  rule  that  it  is  "  neces- 
sary and  proper,"  if  under  an  implied  power.  Congress 
may  not  adopt  any  means  it  may  deem  fit,  even  to  carry 
out  an  express  power.  The  means  must  be  "necessary 
and  proper,"  and  the  Court  is  to  determine  the  question. 
The  necessity,  however,  need  not  be  absolute.  The 
power  to  tax  state  bank-notes  was  exercised  under  the 
express  grant  to  regulate  the  value  of  money. 

The  occurrences  of  the  war  did  not  make  the  acts  Legal  tender 
necessary.  The  notes  would  have  circulated  without  unnecessary. 
the  legal  tender  power,  to  which  he  had  reluctantly 
assented  as  Secretary  of  the  Treasury,  only  because  he 
could  not  otherwise  get  authority  to  issue  notes  that 
were  necessary.  The  legislation  he  favored  contem- 
plated notes  receivable  for  public  dues,  which  function 
would  have  fully  served  the  purpose.  Giving  them 
compulsory  circulation  by  the  acts  in  question  was  an 
element  of  depreciation,  a  declaration  that  the  govern- 
ment was  insolvent.  Every  honest  purpose  would  have 
been  served  without  making  them  legal  tender.  The 
acts  were  really  harmful,  and  largely  increased  the  debt 
by  the  inflation  consequent  upon  the  great  depreciation 
which  these  notes  suffered.  Not  only  were  they  not 
necessary,  but   they  directly  violated  the  express  pro- 


268  CONTEST  FOR  SOUND  MONEY 

visions  of  the  Constitution.  To  be  warranted,  laws  must 
be  not  only  not  prohibited  by,  but  also  consistent  with, 
the  Constitution  in  letter  and  spirit,  as  Marshall  stated. 
The  powers  cited  under  which  Congress  may  impair 
contracts  or  take  private  property  are  undisputed  ex- 
press powers.  Bankrupt  laws  are  the  only  ones  which 
Congress  may  pass  directly  affecting  contracts ;  implied 
powers  require  different  construction. 

Congress  no  doubt  had  the  power  to  issue  notes,  and 
it  was  also  its  duty  to  establish  a  standard  of  value,  in 
order  to  measure  values,  but  every  presumption  is  against 
the  interpretation  that  aught  but  gold  and  silver  could 
be  adopted  for  the  purpose.  All  legislation  contempo- 
raneous with  and  subsequent  to  the  adoption  of  the  Con- 
stitution and  all  judicial  decisions  until  1862,  as  well  as 
all  the  facts  in  our  history,  sustain  this  view.  The 
published  discussions  of  the  framers  of  the  Constitution, 
from  which  their  intent  must  be  deduced,  show  that 
they  intended  to  cut  off  every  pretext  for  making  paper 
legal  tender.  Webster's  opinion  was  unequivocal  that 
Congress  had  no  power  to  make  paper  legal  tender,  and 
the  Court  had  frequently  held  that  coin  alone  constituted 
a  legal  tender  under  the  Constitution. 
Review  of  It  cannot  be  disguised  that  an  exigency,  not  entirely 

decisions.  free  from  a  political  coloring,  influenced  the  rehearing 
and  the  decision  of  1872.  Tried  by  the  cold  facts  of 
history,  the  conclusion  that  the  framers  of  the  Constitu- 
tion intended  to  absolutely  prohibit  the  issue  of  paper  as 
money  with  legal  tender  power  seems  unavoidable.  That 
the  majority  opinion  was  somewhat  influenced  by  its 
probable  effect  is  shown  by  the  two  opening  paragraphs, 
in  which  the  great  distress  likely  to  follow  an  affirmation 
of  the  decision  in  Hepburn  vs.  Griswold  was  set  forth. 
The  "debtor  class,"  a  phrase  then  very  much  in  vogue 
among  politicians,  was  referred  to  in  sympathetic  terms. 


SUPREME  COURT  ON  LEGAL   TENDERS       269 

It  is  difficult  to  see  how  the  legal  status  of  the  measure 
could  be  affected  by  the  question  whether  debtors  or 
creditors  were  upon  the  whole  more  numerous,  or 
whether  debtors  were  suffering  more  at  the  moment  than 
creditors  suffered  when  they  were  compelled  to  accept 
depreciated  paper  on  anterior  contracts.  Moreover,  the 
Court  seemed  to  lose  sight  of  the  fact  that  its  decision  Depreciated 
continued  a  depreciated  currency,  from  which  the  masses  continued 
always  suffer  most  and  the  shrewd  minority  profit  most. 

The  evidence,  however,  is  all  but  conclusive  that  the 
war  could  not  have  been  carried  on  and  the  Union  saved 
without  a  United  States  note-issue,  and  that  the  note- 
issue  would  not  have  been  successful  without  the  forced 
currency  feature  was  evidently  the  opinion,  at  the  time 
of  Lincoln,  Chase,  and  the  leaders  in  Congress. 

Justice  Strong,  despite  the  sweeping  character  of  his 
opinion,  qualified  the  power  of  Congress  over  the  legal 
tender  feature  by  the   phrase   "for   the    time   being." 
Granted  that  the  exercise  of  power  was  necessary,  it 
was  the  almost  unanimous  opinion  of  those  in  Congress 
who  voted  for  the  act  that  it  was  but  a  temporary  expe- 
dient;   as  such  it  was  a  necessary  and  proper  public 
policy ;  although  an  evil,  the  remedy  was  to  be  speedily 
applied  when  the  emergency  passed.     Virtuously  indig-  "Temporary 
nant  at  the  suggestion  that  they  were  about  to  create  ^j^e"^- 
paper  money,  the  leaders  pledged  a  retracing  of  steps  manent. 
when  the  object  was  accomplished.     They  broke  their 
pledges,  for  practically  the  same  men  were  at  the  helm 
in  1865  and  in  1868. 

The  Court  incidentally  pointed  out  the  underlying 
purpose  of  the  first  and  second  legal  tender  acts,  which 
was  that  the  notes  should  be  funded  at  the  option  of  the 
holder.  The  provision  in  the  act  of  March  3,  1863, 
which  repealed  the  funding  pledge,  is  responsible  for 
the  trouble  incident  to  the  legal  tender  notes.     Had  that 


270  CONTEST  FOR  SOUND  MONEY 

privilege  been  continued,  these  notes  would  have  largely 
disappeared  and  national  bank-notes  have  taken  their 
place.  The  maintenance  of  a  necessary  volume  of 
currency  would  doubtless  have  brought  about  free  bank- 
ing at  an  earlier  date,  and  the  trials  and  tribulations 
which  this  "temporary"  currency  in  the  forty  years  of 
its  existence  has  brought  the  nation  would  have  been 
in  large  measure  avoided. 

The  Court  had  settled  the  right  of  Congress  to  issue 
legal  tender  notes  in  an  emergency,  but  could  these 
notes  be  reissued  in  time  of  peace  ?  Had  Congress  the 
power  to  issue,  at  any  time  in  its  discretion,  legal  tender 
notes  ?  This  question  was  brought  before  the  Court  in 
the  case  of  Juilliard  vs.  Greenman  (no  U.  S.  404,  1884) 
and  argued  by  General  Benjamin  F.  Butler  and  Senator 
George  F.  Edmunds  respectively  for  and  against  the  un- 
limited power  of  Congress  to  issue  such  notes. 
Decision  of  The  majority  of  the  Court  (Justice  Field  alone  dis- 
4*  senting)  held  that  the  Constitution   created  a  national 

sovereignty,  quoting  the  grants  of  express  powers  to  lay 
taxes,  to  borrow  money,  to  regulate  commerce,  to  coin 
money  and  regulate  its  value,  and  the  power  to  make  all 
laws  necessary  and  proper  to  carry  into  effect  these  and 
all  other  powers  vested  in  it  by  the  Constitution.  It  was 
repeated  from  previous  decisions  that  the  necessity 
need  not  be  absolute  and  indispensable,  and  the  power 
might  include  all  means  appropriate  in  the  judgment  of 
Congress.  Expressly  prohibited  from  making  anything 
but  gold  and  silver  a  tender,  or  passing  laws  impairing 
the  obligation  of  contracts,  the  states  could  not  exercise 
these  powers.  The  question  whether  the  framers  in- 
tended to  likewise  prohibit  the  federal  government  from 
issuing  paper  money  and  making  it  a  legal  tender  for 
private  debts,  in  view  of  the  silence  of  the  Constitution, 
was  answered  in  the  negative ;  the  power  to  borrow  and 


SUPREME  COURT  ON  LEGAL   TENDERS       27 1 

emit  evidences  of  debt  {i.e.  bills  of  credit)  was  not  con-  Congress 
tested ;  the  power  to  create  banks  for  the  issue  of  notes  eign  p0Wers. 
was  likewise  conceded :  as  a  logical  consequence  Con- 
gress has  the  power  to  issue  its  own  bills  of  credit  in 
such  form  and  with  such  qualities  as  currency  as  accord 
with  the  usage  of  sovereign  governments.  The  authority 
to  confer  the  legal  tender  quality  is  incident  to  the  powers 
referred  to  and  universally  understood  to  belong  to  other 
sovereignties,  and  not  being  prohibited,  it  was  within  the 
power  of  Congress.  The  power  is  as  broad  as  that  of 
coining  money  and  regulating  commerce,  nor  is  it  re- 
stricted by  the  fact  that  the  value  of  contracts  may  be 
affected.  And  the  question  whether  the  issue  is  to  be 
made  in  times  of  special  exigency,  such  as  war,  or  gen- 
erally in  times  of  peace,  is  one  solely  for  Congress  to 
determine. 

Justice  Field,  dissenting,  maintained  that  the  history  Dissenting 
of  the  events  preceding  the  adoption  of  the  Constitution 
left  no  room  for  doubt  as  to  the  intent  of  those  who 
framed  the  instrument,  respecting  legal  tender  paper 
and  impairment  of  contracts.  The  analogy  of  power 
exercised  by  other  sovereignties  was  not  pertinent,  since 
the  organic  law  clearly  limited  the  powers  of  Congress. 
Neither  the  needs  of  the  government  nor  the  fact  that 
the  Constitution  was  silent  on  the  subject  could  give  the 
power.  The  power  to  borrow  money  did  not  include 
the  power  to  make  the  notes  issued  legal  tender  as 
to  private  contracts,  thus  giving  the  debtor  special  priv- 
ileges to  pay  his  creditor  less  value  than  he  agreed. 
Such  a  power  would  enable  the  government  to  interfere 
with  all  property  rights.  Nor  was  the  power  incident 
to  that  of  coining  money,  which  did  not  mean  coining 
anything  but  metals.  To  claim  such  power  was  logically 
claiming  the  power  to  debase  the  coinage,  acknowledged 
by  all  to  be  monstrous  iniquity. 


272 


CONTEST  FOR  SOUND  MONEY 


Strict  con- 
struction of 
implied 
powers. 


Bancroft  on 
the  decision. 


General 
comment. 


Manifestly,  if  the  power  is  not  granted  it  is  withheld, 
and  to  construe  it  as  impliedly  granted  it  must  not  only 
be  appropriate,  not  prohibited,  but,  as  Marshall  also 
said,  consistent  with  the  letter  and  spirit  of  the  Constitu- 
tion. Since  the  United  States  notes  had  been  greatly 
depreciated  and  might  again  be  so,  oppression  and 
injustice  resulted,  and  a  law  promoting  either  of  these 
conditions  was  not  consistent  with  the  Constitution.  He 
reminded  the  majority  that  upon  the  subject  of  laws 
impairing  the  obligation  of  contracts  Marshall  had  also 
said,  "  It  is  against  all  reason  and  justice  for  a  people 
to  intrust  a  legislature  with  such  powers,  and  therefore  it 
cannot  be  presumed  that  they  have  done  so"  (3  Dall.  388). 

If  Congress  has  the  power  claimed  by  the  majority,  it 
may  issue  such  notes  indefinitely  and  pay  its  bonds  with 
them,  no  matter  how  depreciated.  Why  then  should  the 
government  continue  paying  interest  on  the  bonds  when 
the  principal  might  be  paid  in  a  day  ? 

The  historian  George  Bancroft,  already  referred  to, 
maintained,  in  reviewing  the  decision,1  that  the  evidence 
was  complete  that  it  was  the  unalterable  purpose  of  the 
framers  of  the  Constitution  to  prohibit  legal  tender 
paper.  He  declared  the  dictum  that  the  federal  govern- 
ment had  sovereign  powers  to  be  revolutionary.  Its 
powers  were  clearly  limited.  It  had  no  inherent  sover- 
eignty, but  only  that  delegated  to  it  by  the  Constitution. 
European  sovereignties  had  not  the  power  of  making 
notes  legal  tender.  The  attitude  of  Bancroft  illustrates 
the  frame  of  mind  in  which  the  decision  was  received  by 
many  of  our  strongest  and  best  men. 

When  the  federal  Constitution  was  created  and 
adopted  the  people  were  in  a  revulsion  of  feeling  over 
the  suffering  caused  by  the  great  depreciation  of  the 
Continental  currency.     It  depreciated   on   every   one's 

1  Bancroft,  A  Plea  for  the  Constitution. 


SUPREME  COURT  ON  LEGAL    TENDERS       273 

hands.  The  Continental  Congress  redeemed  some  of 
its  issues  at  an  enormous  discount  in  new  issues  that  in 
turn  suffered  a  great  depreciation.  There  is  no  doubt 
that  the  framers  of  the  Constitution  intended,  and  thought 
they  had  succeeded  in,  prohibiting  Congress  from  issuing 
an  irredeemable  currency  and  making  the  same  a  tender 
for  debt.  The  federal  government  was  a  compromise 
in  which  the  states  sought  by  united  strength  to  com-  State  sover- 
mand  respect  and  achieve  consequence  in  the  sisterhood  ^sue! 
of  nations,  at  the  same  time  jealously  retaining  their 
local  sovereignties  in  order  to  avoid  the  dangers  which 
experience  had  taught  them  to  apprehend  from  a  strong 
central  government.  In  respect  to  intercommunication 
they  were  remote  from  each  other  with  the  means  of 
travel  existing  at  the  time,  and  naturally  wished  their 
local  governments  interfered  with  as  little  as  possible. 
The  adoption  of  the  federal  Constitution  gave  to  the 
people  two  sovereigns  —  a  double  allegiance.  The  ques- 
tion which  was  paramount,  state  or  national,  was  an 
active  issue  until  settled  by  the  sword  and  sealed  in 
favor  of  the  Nation,  by  the  surrender  at  Appomattox. 
A  strengthening  of  the  central  government  inevitably 
ensued.  State  sovereignty  ceased  to  be  an  influence, 
and  the  courts  were  left  free  to  discriminate  between 
what  the  framers  of  the  Constitution  had  done  and 
what  they  thought  they  had  done. 

Above  all  things  the  framers  of  the  Constitution  in-  Nationalism 
tended  to  create  a  perpetual  government,  and  when  the 
life  of  the  government  was  at  issue  the  technical  read- 
ing of  the  Constitution  yielded  perforce  to  broader  lines 
gauged  by  the  civic  and  economic  changes  which  a 
century  had  wrought.  The  law  of  self-preservation  con- 
strued the  Constitution  broadly  as  to  the  power  of  Con- 
gress over  currency,  in  the  interest  of  preserving  the 
government. 


II.   THE   SILVER    QUESTION 


CHAPTER   XII 


l86l   TO   1878 


Capital  and 
currency 
distin- 
guished. 


Erroneous 
views. 


"  Capital  is  that  portion  of  all  the  previous  product  of  a 
nation  which  at  any  given  time  is  available  for  new  production. 
This  will  be  a  certain  amount  of  tilled  land,  houses,  buildings, 
stock,  tools,  food,  clothing,  roads,  bridges,  etc.,  which  have 
been  made  and  are  ready  for  use  in  producing,  transporting, 
and  exchanging  new  products.  These  things  are  all  the  product 
of  labor,  and  require  time  for  their  production.  Nothing  but 
labor  spent  upon  them  can  produce  others,  and  time  is  required 
for  this  labor  to  issue  in  new  and  increased  possessions.  Cur- 
rency only  serves  to  distribute  this  capital  into  the  proper  hands 
for  its  most  efficient  application  to  new  production.  Banks,  it 
must  be  repeated,  only  facilitate  the  transfer  of  capital  from 
hands  where  it  is  idle  into  hands  by  which  it  will  be  usefully 
employed.  Currency,  therefore,  is  not  capital,  any  more  than 
ships  are  freight ;  it  is  only  a  labor-saving  machine  for  making 
easy  transfers.  Banks  do  not  create  wealth,  they  only  facilitate 
its  creation  by  distributing  capital  in  the  most  advantageous 
manner.  If,  therefore,  currency  is  multiplied,  it  is  a  delusion 
to  suppose  that  capital  is  multiplied,  or,  if  '  money  is  plenty,' 
by  artificial  increase  of  its  representatives,  it  is  only  like  in- 
creasing the  number  of  tickets  which  give  a  claim  on  a  specific 
stock  of  goods  —  the  ticket-holders  would  be  deceived  and 
could,  in  the  end,  only  get  a  proportional  dividend  out  of  the 
stock."  —  Sumner,  A  History  of  American  Currency. 

For  a  quarter  of  a  century  the  standard  of  value  was 
imperiled,  business  disturbed,  and  the  value  of  all  prop- 
erty subjected  to  uncertainty  by  a  propaganda  on  the  part 
of  a  large  portion  of  our  people  laboring  under  the  con- 
viction that  currency  was  capital  and  that  the  free  coin- 

274 


THE  SILVER   QUESTION  275 

age  of  the  silver  product  of  our  mines,  at  the  behest  of 
any  one  choosing  to  present  the  same  at  the  mints, 
would  add  that  vast  sum  to  the  capital  of  the  country  in 
form  adapted  to  current  use.  The  fiat  of  the  govern- 
ment can  impart  legal  tender  quality  to  currency,  either 
coin  or  paper,  but  its  value  as  expressed  in  articles  of 
commerce  —  what  it  will  buy  —  is  determined  by  its 
commercial  value  or  by  its  convertibility  into  money 
whose  commercial  value  is  equal  to  its  nominal  cur- 
rency value. 

During  the  Civil  War  the  coins  of  the  United  States  ^isappear- 

i-  1     e  .         ,      .  .  ,  .  ance  of 

disappeared  from  circulation  owing  to  the  premium  specie, 
thereon  following  suspension  of  coin  payments  in  De- 
cember, 1 86 1.  The  only  exception  was  in  the  country 
west  of  the  Rocky  Mountains,  where  the  gold  product 
of  California  assisted  the  people  there,  so  far  away  from 
the  seat  of  war  and  possessing  but  indifferent  means  of 
communication  with  the  rest  of  the  country,  to  main- 
tain the  coin  standard.  The  specie  in  the  rest  of  the 
country  was  in  the  Treasury,  in  banks  or  in  private 
hoards,  there  being  no  substantial  amount  of  coin  in 
circulation  outside  the  Treasury  after  1863- 1864. 

The  country  exported  the  greater  part  of  its  esti- 
mated stock  of  #250,000,000  (1861)  and  its  annual 
product  besides. 

No  coinage  laws  whatever  were  passed  from  1861  to 
1865,  and  then  only  minor  coins  were  provided  for. 
Secretary  Chase  indeed  recommended  (1862)  that  the 
five-dollar  gold  piece  be  made  equal  to  the  British  sov- 
ereign, but  nothing  came  of  it. 

The  mints  turned  out  from  1861  to  1867  the  follow- 
ing amounts :  — 

Gold  coin $230,358,000 

Silver  dollars     .........  306,000 

Subsidiary  coin         ........  8,731,000 

Minor  coin        .........  5,638,000 


276 


CONTEST  FOR  SOUND  MONEY 


First 

monetary 

conference. 


Silver 

product 

increased. 


Germany's 
action. 


The  commercial  ratio  of  silver  to  gold  fluctuated  be- 
tween 15.35  and  15.57  to  T>  indicating  a  value  for  the 
silver  dollar  of  from  $1.04  to  $i.02|. 

In  1867  an  international  monetary  conference  met  in 
Paris  at  which  this  country  was  represented.  This  body 
among  other  things  recommended  the  adoption  of  the 
single  gold  standard  and  an  international  coin.  The  latter 
proposition  was  favorably  received.  The  Senate  Finance 
Committee  (June  9,  1868)  made  a  report  recommending 
the  coinage  of  a  dollar  3^  cents  less  in  value  than  the 
existing  one,  thus  making  it  equal  to  5  francs.  It  was 
expected  also  that  the  British  sovereign  would  be  so 
modified  as  to  make  it  exactly  25  francs  or  five  of  the 
proposed  dollars.  Nothing  further  was  done  in  the 
matter. 

The  production  of  silver  in  the  United  States,  which 
in  1 86 1  was  estimated  at  $2,000,000,  steadily  increased, 
chiefly  due  to  the  rich  discoveries  in  Nevada;  by  1868 
the  product  was  $12,000,000,  in  1872  $28,750,000.  The 
coinage  of  silver  dollars  increased  at  once,  and  from 
1868  to  1872  over  3,200,000  of  them  were  struck,  and 
practically  all  were  exported. 

The  Franco-German  War  at  this  time  (1 870-1 871)  had 
a  most  important  and  far-reaching  effect  upon  the 
monetary  standards  of  the  world.  The  brilliancy  of 
the  German  campaign  and  the  triumph  of  her  arms 
placed  the  new  empire  in  the  front  rank  of  military 
powers.  She  received  an  enormous  war  indemnity 
from  France,  5,000,000,000  francs  ($965,000,000),  all  of 
which  was  paid  in  a  comparatively  short  time  after  the 
conclusion  of  peace.  The  prestige  of  her  arms  and  the 
condition  of  her  treasury  greatly  facilitated  the  work  of 
welding  together  the  separate  states,  commercially  as  well 
as  politically,  into  one  harmonious  whole.  The  dream  of 
the  Hohenzollern  was  realized  and  a  unified  Germany 


THE  SILVER   QUESTION  277 

was   the   result.      The   commercial   aspirations   of   the 
German  Empire  proved  equal  to  its  military  ambition, 
and   turning   to   Great   Britain,    the   chief   commercial 
nation,  as  an  exemplar,  its  banking  system  was  copied 
largely  and  the  gold  standard  adopted.     The  coinage  of 
the  country,  which  differed  in  the  separate  states,  was 
unified,  and  the  sale  of  the  greater   part  of   the  old 
silver  pieces  was  determined  upon.     France,  in  order 
not  to  be  swamped  with  the  white  metal  at  its  open  Latin  Union 
mints,  suspended  silver  coinage  for  the  public,  and  the  ^zx 
other  nations  belonging  to  the  Latin  Union  followed  her  coinage. 
example.1    The  action  of  these  nations  in  suspending  the 
free  coinage  of  silver  has  been  held  by  many  to  be  the 
principal  cause  of  the  fall  in  its  commercial  value. 

Contemporaneously  with  these  events  Congress  was  United  states 
at  work  upon  the  revision  of  the  mint  laws,   and  its  revised!  S 
labors  resulted  in  what  is  known  as  the  coinage  law  of 
1873.     This  revision  was  the  result  of  several  years  of 
work  and  discussion,  begun  in  1869  by  John  Jay  Knox 
under  the  direction  of  Secretary  Boutwell. 

The  report  and  draft  of  the  bill  were  transmitted  to 
the  Senate  early  in  1870,  referred  to  its  Finance  Com- 
mittee, and  ordered  printed.  The  House  received  the 
documents  in  June,  1870. 

The  original  bill  made  the  gold  dollar  the  unit  of  Gold  dollar 
value,  discontinued  the  coinage  of  the  silver  dollar,  the 
half  dime  and  three-cent  piece,  and  the  report  not  only 
called  attention  to  the  proposed  discontinuance,  but  dis- 
cussed the  reasons  for  doing  so.  It  had  been  proposed 
to  have  a  dollar,  subsidiary  in  character,  of  384  instead 
of  4i-2|  grains,  with  legal  tender  power  the  same  as 
subsidiary  pieces,  but  this  was  finally  eliminated  from  the 
bill.     Obviously  the  reason  for  recommending  the  dis- 

1  The  Latin  Union  consists  of  France,  Italy,  Switzerland,  Belgium,  and 
Greece. 


unit. 


278  CONTEST  FOR  SOUND  MONEY 

continuance  of  the  old  dollar  of  41 2\  grains  was  that 
its  value  (some  j\  per  cent  greater  than  that  of  the 
subsidiary  silver)  was  then  $1.02  in  the  world's  markets. 
It  was  not  provided  for  in  any  draft  of  the  bill  from 
the  first  to  the  passage  thereof  in  1873.  The  section 
omitting  it  (15th,  afterward  16th)  never  mentioned  it  at 
any  stage. 
History  of  The  bill  was  reported,  with  amendments,  to  the  Senate 

l873>  December,  1870,  debated  and  passed  by  a  vote  of  36  to 

14  on  January  10,  1871.  Senator  Sherman  voted  against, 
and  Senator  Stewart  of  Nevada  for,  the  bill,  but  there 
was  no  division  on  the  question  of  omitting  the  silver 
dollar  and  no  amendment  was  offered  to  restore  the  same. 
The  bill  reached  the  House  January  13  and  went  to 
the  Coinage  Committee.  It  was  not  acted  upon  in  that 
Congress,  however,  and  in  the  next  Representative 
Kelley  (Rep.,  Pa.)  reported  the  same  bill  from  the  com- 
mittee after  it  had,  as  he  said,  "received  as  careful 
attention  as  I  have  ever  known  a  committee  to  bestow 
on  any  measure."  Subsequently  it  was  amended  to 
include  a  384-grain  dollar;  on  April  9,  1872,  it  was 
debated  and  every  section  discussed.  The  fact  that 
the  bill  made  gold  the  sole  standard  was  also  debated, 
Kelley  stating  that  it  was  "  impossible  to  retain  the 
double  standard."  He  called  attention  to  the  fact  that 
the  old  silver  dollar  was  worth  more  than  the  gold 
dollar,  remarking  also  that  "  every  coin  that  is  not  gold 
is  subsidiary."  On  May  27,  1872,  it  passed  by  a  vote 
of  no  to  13  ;  the  negative  vote  was  not  due  to  the 
omission  of  the  silver  dollar. 
Trade  dollar  The  Senate  amended  the  bill  January  17,  1873,  with  a 
provision  for  the  unlimited  coinage  of  a  "trade  dollar" 
of  420  grains,  commercially  worth  more  than  the  Mexi- 
can dollar,  to  compete  with  the  latter  in  the  Oriental 
trade.     Thus  amended  it  became  a  law  on  February  12, 


THE  SILVER   QUESTION  279 

1873.1  It  was  therefore  before  Congress  nearly  three 
years,  printed  at  least  ten  times,  debated  on  several 
occasions,  and  attention  was  directed  to  the  omission  of 
the  old  silver  dollar.  Nevertheless  Kelley,  a  few  years  "Crime  of 
later,  said  that  he  "  did  not  know  that  the  bill  omitted  x  73' 
the  silver  dollar,"  and  Stewart  with  others  declared  that 
the  bill  was  passed  surreptitiously,  denouncing  the  legis- 
lation as  the  "  crime  of  1873."  Yet  in  i874(February  11) 
Senator  Stewart  in  a  speech  in  the  Senate  on  another 
measure  had  said,  "  I  want  the  standard  gold."  Later 
he  asserted  that  he  was  not  aware  until  1875  that  the 
dollar  had  been  omitted  from  the  bill  of  1873.  Kelley, 
who  stated,  when  reporting  the  bill,  that  it  had  been 
studied  by  the  Coinage  Committee  line  for  line  and 
word  for  word,  and  had  announced  that  the  bill  contem- 
plated establishing  the  single  gold  standard,  declared  in 
1877  that  the  demonetization  was  an  unexplained  mys- 
tery to  him. 

It  is  proper  to  pause  to  consider  how  far  men  are  to  Silver  advo- 
be  intrusted  with  the  great  duty  of  legislating  upon  sub-  f^se/feno- 
jects  affecting  the  interests  of  every  citizen,  if  so  glar-  ranee, 
ing  a  neglect  of  duty  is  confessed.     It  is  unnecessary 
to  say  that  it  was  the  duty  of  Kelley,  Stewart,  and  all 
the  others  then  in  Congress  to  know  what  they  were 
legislating  upon.     If,  therefore,  the  act  was  wrong,  they 
are   themselves  guilty  of   wrong,  and   their  professed 
ignorance  (in  Kelley's  case  disproved  by  the  facts)  is 
merely  an  aggravation  of  the  offence.     The  truth  is  that 
the  growing  political  strength  of   the  silver  advocates 
alarmed  many  men  who  voted  for  the  law  of  1873,  and 
they  thought  it  better  politics  to  explain  their  vote  as  an 
unwitting  act  rather  than  justify  it. 

1  History  of  the  coinage  act  of  1873,  being  a  complete  record  of  all 
documents  issued  and  all  legislative  proceedings  concerning  the  act. 
Public  document  printed  in  1900. 


28o 


CONTEST  FOR  SOUND  MONEY 


The  par  of 

sterling 

exchange. 


Trade  dol- 
lar coinage 
suspended. 


The  act  of  1873  altered  the  coinage  laws  in  several 
other  particulars.  The  charge  on  gold  coinage  was 
reduced  to  one-fifth  of  1  per  cent;  a  three-dollar 
piece  of  gold  was  provided  for ;  the  subsidiary  coinage 
was  modelled  after  that  of  France  as  to  weight,  giving 
25  grammes  (185.8  grains)  to  the  dollar  in  such  coins 
instead  of  184  grains;  and  these  coins  were  continued 
legal  tender  to  the  amount  of  $5.  Trade  dollars  were 
to  be  coined  for  the  public,  but  subsidiary  pieces  only 
on  government  account. 

An  act  of  March  2,  1873,  reformed  the  absurd  method 
of  quoting  the  par  of  exchange  with  Great  Britain,  which 
continued  as  a  relic  from  the  old  act  of  1789,  at  the 
ancient  rate  of  $4.44!  to  the  pound  sterling,  notwith- 
standing the  act  of  1842,  wherein  $4.84  had  been 
adopted  as  the  par  for  payments  by  or  to  the  Treasury. 
Thereafter  the  pound  was  to  be  rated  at  $4.8665,  its 
actual  value. 

The  law  of  January  14,  1875  (resumption  act),  repealed 
the  coinage  charge  for  the  purpose  of  attracting  gold  to 
the  mints,  and  provided  for  the  issue  of  subsidiary  silver 
to  redeem  the  fractional  currency,  and  the  act  of  March  3, 
1875,  provided  for  the  coinage  of  a  twenty-cent  piece  in 
exact  proportion  to  the  other  subsidiary  coins. 

The  fractional  currency  was  presented  for  redemption 
slowly,  wherefore  the  act  of  April  17,  1876,  provided 
for  the  issue  of  subsidiary  coin  in  other  payments,  and 
the  joint  resolution  of  July  22,  1876,  extended  the  limit 
of  issue  of  such  coin  to  $50,000,000. 

The  same  enactment  revoked  the  legal  tender  power 
of  the  trade  dollar,  inadvertently  given  it  the  same  as 
to  subsidiary  pieces,  by  the  act  of  1873.  It  further 
provided  that  the  Secretary  of  the  Treasury  might 
suspend  its  coinage  when  satisfied  that  there  was  no 
export   demand,    and   inasmuch    as   these   dollars   had 


THE  SILVER   QUESTION  281 

made  their  appearance  in  the  country's  circulation,  it 
seemed  that  the  coinage  of  $36,000,000  was  in  excess  of 
the  demand. 

Returning  now  to  the  silver  dollar.  Although  the  act  l^1  tender 
of  1873  omitted  it  from  the  coins  provided  for,  and  pro-  silver  dollars, 
hibited  its  coinage,  it  did  not  revoke  the  legal  tender 
function  of  the  dollars  then  in  existence  ;  but  on  June  22, 
1874,  Congress  adopted  a  revision  of  the  statutes  then 
in  force,  and  Section  3586,  purporting  to  represent  the 
law  as  it  then  stood,  provided  that  "  the  silver  coins  of 
the  United  States  shall  be  a  legal  tender  at  their  nominal 
value  for  any  amount  not  exceeding  five  dollars  in  any 
one  payment."  It  was  contended  that  this  abrogated 
the  full  legal  tender  power  of  the  existing  dollars ;  on 
the  other  hand,  it  was  held  that  a  mere  revision  could 
not  repeal  the  statute.  No  occasion  then  arose  for 
determining  this  question. 

How  and  when  the  agitation  to  restore  silver  to  free 
coinage  actually  began,  seems  in  doubt,  but  the  increased 
production  in  the  far  Western  states,  now  averaging 
$40,000,000  annually,  and  the  fall  in  price  under  the 
influence  of  diminished  demand,  unquestionably  were 
the  causes.  The  greater  demand  for  gold  coincident 
with  the  diminution  of  product,  brought  the  commercial 
ratio  of  the  metals  to  17.5  to  I. 

In  March,  1876,  a  bill  making  certain  appropriations  Remonejiza- 

,  .  1  •  •         1         tt  i-i  tion  of  dollars 

was  under  consideration  in  the  House,  to  which  was  proposed, 
appended  a  proviso  for  the  redemption  of  fractional 
currency  in  silver  coin.  Reagan  (Dem.,  Tex.)  proposed 
an  amendment  making  the  silver  dollar  a  legal  tender 
up  to  $50,  but  not  providing  for  coinage ;  this  was 
adopted  124  to  94.  In  the  Senate  Sherman  reported 
this  bill  from  the  Committee  on  Finance  in  April,  modi- 
fying the  legal  tender  power  to  $20,  and  providing  for 
the  coinage,  on  government  account,  of  a  dollar  of  412.8 


282 


CONTEST  FOR  SOUND  MONEY 


"  Coin 
notes  " 
posed. 


pro- 


Silvej  com- 
mission 
appointed. 


grains  (giving  a  ratio  of  exactly  16  to  i),  these  dollars 
to  be  legal  tender  for  all  purposes  except  customs  and 
interest  on  the  public  debt.  But  subsequently  the  whole 
proviso  was,  upon  Sherman's  own  motion,  stricken  out, 
together  with  the  Reagan  amendment.  Bogy  (Dem., 
Mo.)  in  the  course  of  the  debate  favored  the  free  and 
unlimited  coinage  of  the  silver  dollars  with  full  legal 
tender  power. 

On  July  19,  Bland  (Dem.,  Mo.)  reported  a  bill  in  the 
House  which  provided  for  coin  notes  to  pay  for  un- 
limited deposits  of  gold  or  silver,  repayable  on  demand 
in  kind  (bars  or  coin),  and  for  the  coinage  of  a4i2.8-grain 
silver  dollar;  the  notes  to  be  receivable  for  all  public 
dues  and  the  coins  to  be  full  legal  tender.  As  a  sub- 
stitute for  this,  on  July  24,  Kelley  endeavored  to  pass 
a  free  coinage  bill  (previously  introduced  by  him) 
under  suspension  of  the  rules  (requiring  a  two-thirds 
vote).  The  motion  was  defeated  119  to  66  (99  not 
voting),  32  Republicans  voting  favorably,  27  Democrats 
against.  Bland  later  made  a  similar  attempt,  which 
was  also  defeated.  The  votes,  however,  demonstrated 
the  ability  of  the  silver  men  to  pass  such  a  bill.  A 
compromise  measure  was  therefore  introduced,  and 
passed  August  15,  1876,  to  appoint  a  commission  to 
inquire  into  the  whole  subject  and  report  to  Congress. 

The  commission  was  to  consist  of  three  senators, 
three  representatives,  and  not  to  exceed  three  experts, 
who  were  to  inquire  :  — 

First.  Into  the  change  which  has  taken  place  in  the 
relative  value  of  gold  and  silver ;  the  causes  thereof, 
whether  permanent  or  otherwise ;  the  effects  thereof 
upon  trade,  commerce,  finance,  and  the  productive  in- 
terests of  the  country,  and  upon  the  standard  of  value 
in  this  and  foreign  countries. 

Second.     Into  the  policy  of  restoration  of  the  double 


THE  SILVER   QUESTION  283 

standard  in  this  country  ;  and  if  restored,  what  the  legal 
relation  between  silver  and  gold  should  be. 

Third.  Into  the  policy  of  continuing  legal  tender 
notes  concurrently  with  the  metallic  standards,  and  the 
effects  thereof  upon  the  labor,  industries,  and  wealth  of 
the  country ;  and 

Fourth.  Into  the  best  means  for  providing  for  facili- 
tating the  resumption  of  specie  payments. 

The  commission  consisted  of  Senators  Jones  (Rep., 
Nev.),  Bogy  (Dem.,  Mo.),  and  ex-Secretary  Boutwell ; 
Representatives  Gibson  (Dem.,  La.),  Willard  (Rep., 
Mich.),  and  Bland  (Dem.,  Mo.),  W.  S.  Groesbeck,  of 
Ohio,  Francis  Bowen,  of  Massachusetts,  professor  in 
Harvard;  and  George  M.  Weston  of  Maine  as  secretary. 
It  gave  the  matter  undivided  attention  and  presented  a 
voluminous  report  March  2,  18771  (discussed  below). 

The  political  platforms  in  1876  were  silent  on  the 
subject;  it  had  not  developed  sufficiently  to  permit 
declaration. 

Bland  could  not  await  the  report  of  the  commission 
(of  which  he  was  a  member).     In  December,  1876,  he 
again  pushed  his  bill,  but  ultimately  preferred  the  Kel-  Free  coinage 
ley  substitute,  which  on  the  13th  of  the  month  passed  the  House, 
the  House  by  a  vote  of  167  to  53. 

In  the  Senate  the  Finance  Committee  reported  it 
back  without  recommendation,  desiring  to  await  the 
report  of  the  commission. 

The  report  of  the  majority  of  the  Silver  Commission 
(an  exhaustive  document),  favoring  remonetization,  was 
written  by  Senator  Jones.  Bogy,  Willard,  Bland,  and 
Groesbeck  concurred.  Separate  reports  (minority)  were 
presented  by  Boutwell  and  Bowen,  Gibson  concurring 
in  the  latter.  Of  the  majority,  Jones,  Bogy,  and  Willard 
favored  the  coinage  at  the  ratio  of  15^  to  1  (like  that  of 

1  Senate  Report,  No.  703,  44th  Congress,  2d  Sess. 


284 


CONTEST  FOR  SOUND  MONEY 


The  commis- 
sion's report. 


Favored 

remonetiza- 

tion. 


France  and  the  Latin  Union);  Groesbeck  and  Bland 
preferred  the  existing  16  to  I. 

The  majority  contended  that  the  fall  in  price  of  silver 
had  not  been  due  to  increased  production  but  to  prac- 
tical demonetization  in  so  many  countries  at  the  same 
time ;  that  there  was  an  exaggerated  idea  of  the  volume 
of  the  silver  product,  whereas  the  gold  product  was 
actually  diminishing,  and  by  the  stimulation  of  its  use 
by  the  adoption  of  the  single  gold  standard  the  price  of 
silver  was  further  depressed.  The  double  standard  was 
advocated  as  having  a  compensatory  influence,  so  that 
prices  would  not  be  violently  depressed,  as  was  sure  to 
follow  if  the  demonetization  were  persisted  in.  There 
were  no  new  circumstances  warranting  the  change  from 
bimetallism.  Open  mints  in  France  and  the  United 
States  would  overcome  the  effects  of  fluctuation.  The 
entire  volume  of  coin  money  governed  prices,  and  to 
reduce  the  volume  would  be  an  unjust  interference  with 
the  course  of  prices.  Decreasing  volume  and  the  re- 
sulting fall  in  prices  were  more  disastrous  than  war, 
pestilence,  or  famine,  as  history  showed. 

Respecting  the  duty  of  the  United  States,  they  urged 
that  with  an  enormous  debt  which  was  payable  by  the 
terms  of  the  law  and  equitably  as  well  in  silver  dollars, 
the  proposition  to  make  it  payable  in  gold  alone  was  to 
impose  onerous  and  oppressive  obligations  upon  the 
people.  The  existing  economic  troubles  in  the  entire 
commercial  world  were  due  to  a  diminishing  money 
supply. 

They  did  not  hesitate  to  insinuate  that  an  inter- 
national conspiracy  was  afoot  to  establish  the  gold 
standard  and  thus  lay  burdens  upon  the  masses,  point- 
ing as  evidence  to  the  international  conference  of  1867 
and  Sherman's  bill  to  make  gold  the  sole  standard 
thereafter,  and  also  the  act  of   1873. 


THE  SILVER   QUESTION  285 

The  questions  propounded  were  substantially  answered  Their  con- 

elusions. 

as  follows :  — 

That  the  change  in  the  relative  value  of  the  metals 
would  not  be  permanent  unless  general  demonetization 
took  place,  in  which  case  the  most  serious  consequences, 
social,  industrial,  political,  and  economical  would  follow. 

That  the  double  standard  should  be  restored  in  order 
to  avert  the  danger  threatening  the  entire  world. 

That  paper  could  not  be  maintained  concurrently  with 
coin  unless  its  market  value  was  made  equal  to  coin  by 
convertibility. 

That  convertibility  by  means  of  resumption,  extremely 
difficult  with  coinage  of  both  metals,  would  be  imprac- 
ticable with  gold  alone. 

As  stated,  three  of  the  majority  members  favored  the 
ratio  15^  to  1  ;  this  in  order  to  bring  about  concurrent 
action  with  France  and  the  Latin  States. 

Boutwell  opposed  the  remonetization  unless  by  inter-  Dissenting 

views. 

national  agreement.  Otherwise  in  his  opinion  silver 
would  flow  to  this  country  in  such  quantities  that  it 
would  be  reduced  to  a  silver,  hence  depreciated,  stand- 
ard. He  admitted  that  demonetizing  one  metal  in-  Boutwell. 
creased  the  purchasing  power  of  the  other,  reduced 
prices  and  increased  debts ;  the  use  of  both  metals  fur- 
nished a  more  stable  standard  ;  but  the  remonetization  by 
the  United  States  alone  would  prove  the  worse  for  them  ; 
that  it  appeared  public  sentiment  in  Europe  now  favored 
remonetization,  so  that  cooperation  could  probably  be 
secured  ;  until  then  action  should  be  delayed. 

Professor  Bowen's  view,  concurred  in  by  Gibson,  was  Bowen. 
that  the  change  in  relative  values  was  due  to  the  fluctua- 
tion of  silver,  which  was  caused  by  increased  product  and 
diminished  use,  proof  of  its  unfitness  as  a  money  metal; 
whether  permanent  or  not,  was  impossible  to  determine. 
He  regarded  the  double  standard  an  illusion  ;  silver  was 


286 


CONTEST  FOR  SOUND  MONEY 


Great  fall  in 
silver. 


Payment  of 
bonds  in 
silver. 


further  unfitted  except  for  subsidiary  purposes  by  reason 
of  bulk  ;  the  concurrent  use  of  government  paper  would 
be  unjust,  since  its  redemption  had  been  pledged;  re- 
sumption was  indeed  practically  at  hand.  He  recom- 
mended a  subsidiary  dollar  345.6  grains  pure  silver 
(380.16  grains  standard)  to  be  issued  in  exchange  for 
$1,  $2,  and  $5  notes  to  be  cancelled;  the  coin  to  be 
legal  tender  to  $20,  but  receivable  in  any  amount  for 
public  dues  other  than  customs ;  small  notes  not  to  be 
legal  tender  after  1878 ;  gold  to  be  coined  at  the  rate  of 
22.6  grains  pure  to  the  dollar,  so  that  the  half  eagle 
would  be  practically  equal  to  the  pound  sterling;  legal 
tenders  to  be  retired  at  the  rate  of  $3,000,000  monthly ; 
resulting  deficits  to  be  made  up  by  sale  of  bonds. 

During  1876  silver  had  fallen  so  that  at  its  lowest  the 
ratio  was  20  to  1 . 

In  1877  Western  Republican  platforms  called  loudly 
for  remonetization,  Iowa  and  Ohio  taking  the  lead. 
Even  Pennsylvania  joined  in.  The  Democrats  de- 
nounced the  demonetization  as  a  "  Republican  outrage," 
although  Democrats  had  voted  for  the  bill  of  1873  quite 
as  solidly. 

The  Hayes  administration  with  Sherman  as  Secretary 
of  the  Treasury  began  March  4,  1877.  In  negotiating 
a  new  contract  for  the  sale  of  bonds  the  question  arose 
whether  the  new  obligations  would  be  payable  in  gold. 
The  refunding  act  of  1870  provided  that  the  obligations 
were  to  be  payable  in  "  coin  of  the  present  standard 
value."  Inasmuch  as  the  legal  tender  power  of  the 
silver  dollar  was  apparently  not  affected  by  the  act  of 
1873,  and  certainly  was  an  existing  power  in  1870,  the 
question  was  pertinent.  Sherman  answered  that  the 
bonds  would  be  payable  "  in  coin "  as  required  by 
the  law,  but  that  they  would  bear  date  as  issued  (1877) 
"when  only  one  kind  of  coin  is  a  legal  tender  for  all 


THE  SILVER   QUESTION  287 

debts."     After  some  discussion  the  matter  was  referred 

to  Attorney-general  Devens,  who  ruled  that  the  bonds 

could  not  be  made  payable  "  in  gold  coin  "  ;  that  under 

the  statute  of  1870  they  were  unquestionably  redeemable 

in  "  coin  of  the  standard  value  as  it  existed  at  the  date  "Coin "not 

of  the  act";  and  that  all  the  bonds  would  stand  alike,  g0    ony' 

no  matter  when  issued,  unless  the  law  was  altered.1 

Obviously  the  bonds  authorized  to  be  sold  for  resump- 
tion purposes  (act  of  1875)  fell  within  the  same  cate- 
gory ;  and  the  legal  tender  notes  were  to  be  redeemed 
in  coin;  gold  was  not  specified.  Upon  the  other  hand, 
in  1875  gold  was,  by  the  act  of  1873,  the  unit  of  value; 
and  according  to  the  Revised  Statutes  (1874,  already 
quoted),  the  silver  coins  were  not  legal  tender  above  $5. 
The  point  could  have  been  determined  by  reference  to 
Congress,  but  that  body  was  for  silver  by  a  large  major- 
ity. It  consisted  of  156  Democrats  and  136  Republicans 
in  the  House;  the  Senate  was  evenly  divided,  counting 
Davis  of  Illinois  against  the  Republicans. 

Bland  again  introduced  his  free  coinage  bill,  and  it  Another  free 
passed  under  a  suspension  of  the  rules  November  5, 
1877.  The  vote,  163  to  34  (not  voting  92),  indicates 
that  many  representatives  dodged  the  question ;  the 
negative  vote  included  only  10  Democrats,  Hewitt  among 
these ;  on  the  Republican  side,  Frye  and  Reed ;  the 
affirmative,  such  Democrats  as  Carlisle,  Cox,  Ewing, 
Morrison,  and  Republicans,  Foster,  McKinley,  Cannon, 
Kelley,  and  Keifer. 

The  bill  was  as  follows  :  — 

"That  there  shall  be  coined,  at  the  several  mints  of  the 
United  States,  silver  dollars  of  the  weight  of  412^  grains  troy 
of  standard  silver,  as  provided  in  the  act  of  January  18,  1837, 
on  which  shall  be  the  devices  and  superscriptions  provided  by 
said  act ;  which  coins,  together  with  all  silver  dollars  hereto- 

1  Specie  Resumption,  etc.,  Ex.  Doc,  No.  9,  46th  Congress,  2d  Sess. 


288 


CONTEST  FOR  SOUND  MONEY 


fore  coined  by  the  United  States,  of  like  weight  and  fineness, 
shall  be  a  legal  tender  at  their  nominal  value,  for  all  debts  and 
dues,  public  and  private,  except  when  otherwise  provided  by 
contract ;  and  any  owner  of  silver  bullion  may  deposit  the 
same  at  any  United  States  mint  or  assay  office,  to  be  coined 
into  such  dollars  for  his  benefit  upon  the  same  terms  and  con- 
ditions as  gold  bullion  is  deposited  for  coinage  under  existing  laws. 
"  All  acts  and  parts  of  acts  inconsistent  with  the  provisions 
of  this  act  are  repealed." 


Allison's 
amend- 
ments. 


Hayes  on 
silver. 


In  the  Senate  Allison  reported  the  bill  November  21, 
with  an  amendment  proposing,  in  lieu  of  free  coinage, 
the  government  purchase  of  a  limited  amount  (not  less 
than  $2,000,000  nor  more  than  $4,000,000  monthly)  of 
bullion  and  coinage  on  its  own  account,  leaving  the 
dollars  full  legal  tender,  which  was  adopted  by  49  to 
22  ;  the  opponents  were  of  course  the  extreme  advocates 
of  free  coinage. 

Meanwhile  President  Hayes  in  his  first  message  in 
December  took  up  the  subject,  earnestly  urging  Con- 
gress to  consider  the  implied  breach  of  faith  involved  in 
the  proposed  silver  measure  respecting  the  public  debt, 
and  the  interference  with  the  pending  reduction  of  the 
interest  rate ;  this  involved  a  loss  greater  than  the  sup- 
posed gain  of  paying  in  a  cheaper  dollar.  While  op- 
posed to  the  disparagement  of  silver,  he  recognized  that 
equality  with  the  commercial  ratio  was  not  attainable, 
hence  the  cheaper  coin  would  drive  the  better  abroad ; 
and  recommended  a  dollar  that  would  approach  nearer 
the  commercial  value  of  silver  with  only  limited  legal 
tender  power.  Without  this,  only  mischief  and  misfor- 
tune would  flow  from  silver  coinage.  The  expectation 
of  monetary  ease  from  free  coinage  he  regarded  as  a 
delusion. 

Secretary  Sherman  in  his  report1  practically  stated 

1  Finance  Report,  1877. 


THE  SILVER   QUESTION  289 

the  same  points  in  another  form.  He  asked  that  the 
bonds  issued  from  1873  to  date,  amounting  to  nearly 
$593,000,000,  be  exempted  from  the  operation  of  the 
proposed  silver  law,  having  been  paid  for  in  gold  ;  but  he 
also  favored  the  pledge  of  gold  payments  for  all  bonds. 

He  insisted  that  to  coin  a  dollar  worth  9  per  cent 
less  than  gold  would  drive  out  gold,  just  as  it  was  driven 
out  under  the  act  of  1792,  and  the  same  as  silver  was 
driven  out  under  the  rating  in  1834;  that  a  dollar  sub- 
sidiary in  character,  with  limited  legal  tender  power, 
would  be  a  great  public  advantage,  unlimited  coinage 
a  great  public  injury. 

When  the  Senate  resumed  consideration  of  the  Bland 
Bill  amendments  to  coin  a  heavier  dollar,  to  accord 
more  nearly  with  the  commercial  ratio,  were  defeated 
(49  to  18)  by  the  combination  of  the  extreme  and  the 
moderate  silver  advocates ;  the  latter  included  Allison, 
Windom,  Davis,  Matthews,  and  Blaine ;  the  anti-silver 
vote  included  Morrill  (Vt),  Conkling,  Hoar,  Dawes,  and 
Bayard.  An  amendment  to  make  the  dollars  redeem-  Amend- 
able in  gold,  and  one  which  made  the  dollars  not  a  ten-  p0eSed.pr° 
der  for  customs  or  interest  on  the  public  debt,  were 
defeated.  An  amendment  by  Booth  (Cal.)  (nominally 
a  Republican,  but  actually  a  Greenbacker,  having  been 
candidate  for  Vice-President  with  Peter  Cooper),  pro- 
viding for  the  issue  of  silver  certificates  on  deposits  of 
dollars  in  the  Treasury,  and  making  such  certificates  re- 
ceivable for  all  public  dues  and  reissuable,  was  adopted; 
also  an  amendment  calling  for  an  international  confer- 
ence on  silver,  one  providing  that  the  dollars  were  to 
be  tenders  only  when  not  otherwise  expressly  stipulated 
and  not  at  all  for  redemption  of  gold  certificates.  The 
final  vote  on  the  bill,  February  15,  1878,  was  48  to  21  ; 
Blaine  on  this  vote  was  on  the  negative  side. 

The  House  passed  it,  February  21,  as  amended  by 


290  CONTEST  FOR  SOUND  MONEY 

Limited         the  Senate,  203  to  72 ;  Hayes  vetoed  the  bill  on  the  28th, 

coinage  act  ,   .  .  .  . .  , , 

passed.  ano-  rt  was  promptly  passed  over  the  veto  on  the  same 

day ;  House  196  to  73,  Senate  46  to  19.  Among  the 
Republicans  voting  to  override  the  veto  were  Repre- 
sentatives Butler,  Charles  Foster,  William  McKinley, 
and  Kelley ;  Senators  Allison,  Matthews,  and  Windom. 
Supporting  Hayes  were  Representatives  Hale,  Reed, 
Garfield,  and  Frye ;  Senators  Blaine,  Conkling,  Dawes, 
Hoar,  and  Morrill  (Vt). 

The  vote  in  both  houses  was  sectional  rather  than 
partisan,  only  a  few  members  of  Congress,  except  from 
the  East,  opposing  the  measure. 

Hayes's  veto.  Hayes's  reasons  for  his  veto  were  chiefly  that  making 
the  dollars  and  certificates  receivable  for  customs  would 
soon  deprive  the  country  of  its  gold  revenues ;  that  the 
public  credit  was  affected  by  making  the  debt  payable 
in  silver,  thus  practically  scaling  it  8  to  10  per  cent, 
which  represented  the  lower  value  of  the  silver  dollar 
in  the  market  at  that  time.  Over  $580,000,000  of  the 
bonds  had  been  issued  since  the  act  of  1873  ;  gold  was 
received  for  them,  and  the  subscribers  were  practically 
assured  that  they  would  be  paid  in  gold;  the  govern- 
ment received  the  benefit  of  a  lower  interest  rate 
by  such  assurance.  While  some  measures  should  be 
adopted  to  retain  the  use  of  silver  as  money  of  the  coun- 
try, this  measure  violated  the  obligation  of  the  Nation, 
the  keeping  of  which  "  transcends  all  questions  of 
profit  or  public  advantage." 

"  It  is  my  firm  conviction  that  if  the  country  is  to  be  bene- 
fited by  a  silver  coinage,  it  can  be  done  only  by  the  issue  of 
silver  dollars  of  full  value,  which  shall  defraud  no  man.  A  cur- 
rency worth  less  than  it  purports  to  be  worth  will  in  the  end 
defraud  not  only  creditors,  but  all  who  are  engaged  in  legiti- 
mate business,  and  none  more  surely  than  those  who  are  de- 
pendent on  their  daily  labor  for  their  daily  bread." 


THE  SILVER   QUESTION  29 1 

Senator  Matthews  (Rep.,  0.)  on  January  16,  1878,  in-  The 

IVTcitthcws 

troduced  a  concurrent  resolution  (not  requiring  the  Presi-  resolution, 
dent's  approval  and  hence  only  declaratory)  with  long 
preambles,  declaring  that  the  bonds  of  the  United  States 
were  payable  in  silver  dollars,  and  making  such  dollars 
legal  tender  in  payment  of  public  debt  was  not  a  viola- 
tion of  the  public  faith  nor  in  derogation  of  rights  of 
public  creditors.  The  preamble  argued  that  the  act 
of  1 869  made  the  obligations  payable  in  coin  ;  all  bonds 
issued  under  the  funding  acts  of  1870  and  1871  were 
payable  in  coin  of  the  then  standard,  which  (being 
prior  to  1873)  included  the  silver  dollar.  The  resolu- 
tion was  adopted  43  to  22.  All  amendments  were 
voted  down,  and  one  to  the  preamble  reciting  that  only 
some  8,000,000  silver  dollars  had  been  coined  from  1 792 
to  date,  that  the  coin  was  obsolete  and  had  no  existence 
when  the  bonds  were  authorized,  that  the  coinage  act 
of  1873  had  made  gold  the  standard,  that  creditors  had 
a  right  to  expect  gold,  that  the  government  ought  not 
to  take  advantage  of  obsolete  laws,  and  that  the  dollar 
was  worth  only  92  cents,  received  only  17  affirmative 
votes,  13  being  Republican.  Only  the  strong  sound 
money  men  supported  the  amendment. 

In  the  House  the  resolution  passed  January  29  by 
189  to  79,  the  vote  being  practically  the  same  as  the 
subsequent  vote  on  the  silver  law. 

The  legislature  of  Illinois  had,  in  May,  1877,  passed 
an  act  to  make  all  silver  coins,  the  standard  of  which 
had  been  declared  by  Congress,  a  legal  tender.  Gov- 
ernor Cullom  vetoed  the  act. 

A  new  form  of  currency  inflation  was  thus  found  in   Silver  infla- 
this  use  of  silver.     That   the  intent  was  to  raise   the 
price  of  silver  is  evident.     The  production  of  the  white 
metal  was  increasing  not  only  in  this  country  but  else- 
where.    Whether  free  coinage  would  have  raised  the 


292  CONTEST  FOR  SOUND  MONEY 

price  except  temporarily,  is  doubtful.  The  compromise 
measure  fathered  by  Senator  Allison  was  not  likely  to 
"  restore  the  value  "  of  silver,  hence  Bland's  persistence 
in  pushing  the  free  coinage  measure  after  the  compro- 
mise had  passed. 

In  accordance  with  the  second  section  of  the  act  of 
1878,  the  chief  commercial  nations  were  invited  by  the 
President  to  send  delegates  to  a  conference  to  meet  in 
Paris  in  August,  to  consider  the  adoption  of 

The  inter-        "  a  common  ratio  between  gold  and  silver,  for  the  purpose  of 
nationa  establishing,  internationally,  the  use  of  bimetallic  money,  and 

conference  of  °'  •"  ■" 

!878  securing  fixity  of  relative   value  between  those  metals ;    such 

conference  to  be  held  at  such  place,  in  Europe  or  in  the  United 
States,  at  such  time  within  six  months,  as  may  be  mutually  agreed 
upon  by  the  executives  of  the  governments  joining  in  the  same 
whenever  the  governments,  so  invited,  or  any  three  of  them, 
shall  have  signified  their  willingness  to  unite  in  the  same." 

.  Eleven  countries  replied  favorably  and  were  repre- 
sented ;  the  United  States  by  ex-Senator  Fenton  (N.Y.), 
Groesbeck  (O.),  Francis  A.  Walker  (Mass.),  with  S. 
Dana  Horton  as  secretary. 

At  the  conference  the  American  delegates  found  the 
representatives  of  European  countries  well  informed, 
and  many  well  disposed  toward  international  bimetal- 
lism. Others,  however,  were  content  to  let  the  United 
States  solve  its  problem  alone. 

The  several  propositions  from  the  Americans,  look- 
ing to  the  general  reopening  of  the  mints  to  coinage 
upon  an  agreed  ratio  which  could  be  maintained,  were 
thoroughly  discussed  and  a  mass  of  valuable  material 
was  laid  before  the  body ;  but  the  conference  finally 
dissolved  on  August  29  without  results.  The  proposi- 
tions were  as  follows  :  — 

Propositions         "  I.   It  is  the  opinion  of  this  assembly  that  it  is  not  to  be 
considered,      desired  that  silver  should  be  excluded  from  free  Coinage  in 


THE  SILVER    QUESTION  293 

Europe  and  in  the  United  States  of  America.  On  the  con- 
trary, the  assembly  believe  that  it  is  desirable  that  the  unre- 
stricted Coinage  of  Silver,  and  its  use  as  Money  of  unlimited 
Legal  Tender,  should  be  retained  where  they  exist,  and,  as  far 
as  practicable,  restored  where  they  have  ceased  to  exist. 

"  II.  The  use  of  both  Gold  and  Silver  as  unlimited  Legal- 
Tender  Money  may  be  safely  adopted  ;  first,  by  equalizing 
them  at  a  relation  to  be  fixed  by  international  agreement ;  and, 
secondly,  by  granting  to  each  metal  at  the  relation  fixed  equal 
terms  of  Coinage,  making  no  discrimination  between  them." 

The  European  delegates  replied  that  they  recognized  : 

"  I.   That  it  is  necessary  to  maintain  in  the  world  the  mone-   ReP!y  of 
tary  functions  of  Silver  as  well  as  those  of  Gold,  but  that  the   n^ates1 
selection  for  use  of  one  or  the  other  of  the  two  metals,  or  of 
both  simultaneously,  should  be  governed  by  the  special  position 
of  each  State  or  group  of  States. 

"  II.  That  the  question  of  the  restriction  of  the  Coinage  of 
Silver  should  equally  be  left  to  the  discretion  of  each  State  or 
group  of  States,  according  to  the  particular  circumstances  in 
which  they  may  find  themselves  placed  ;  and  the  more  so,  in 
that  the  disturbance  produced  during  the  recent  years  in  the 
Silver  market  has  variously  affected  the  monetary  situation  of 
the  several  countries. 

"  III.  That  the  differences  of  opinion  which  have  appeared, 
and  the  fact  that  even  some  of  the  States,  which  have  the 
Double  Standard  find  it  impossible  to  enter  into  a  mutual  en- 
gagement with  regard  to  the  free  Coinage  of  Silver,  exclude  the 
discussion  of  the  adoption  of  a  common  ratio  between  the  two 
metals." ■ 

France,  which  had  been  expected  to  lead  in  support 
of  the  bimetallic  proposition,  while  favoring  it  in  theory, 
felt  it  impracticable  to  agree  at  the  time,  and  certainly 
could  not  at  any  ratio  other  than  her  own,  i5|  to  1 ; 
Great  Britain  had  sent  delegates  without  power  to  com- 
mit the  government,  and  these  delegates  (having  had 

1  International  Monetary  Conference,  1878,  Senate  Ex.  Doc,  No.  58, 
45th  Congress,  3d  Sess. 


294 


CONTEST  FOR  SOUND  MONEY 


Conference 
ineffective. 


Bimetallists. 


the  benefit  of  the  report  of  a  British  silver  commission  in 
1 876- 1 877),  while  believing  a  general  gold  standard  Uto- 
pian, and  while  desiring  the  continued  use  of  silver  as 
money  on  account  of  India,  could  not  favor  the  double 
standard  ;  Germany  had  refused  to  send  delegates,  being 
satisfied  with  her  newly  adopted  gold  standard ;  Russia 
and  Austria,  silver  standard  countries  with  actually  de- 
preciated paper  currencies,  might  be  favorable  at  some 
time ;  Belgium  and  the  Scandinavian  states,  as  also 
Switzerland,  favored  gold ;  Italy  alone,  also  suffering 
from  depreciated  paper,  favored  immediate  adoption  of 
the  American  proposal. 

Consequent  upon  the  publication  of  the  deliberations 
of  the  conference  there  arose  in  the  United  States  a 
distinct  body  of  conservative  silver  advocates,  logically 
favoring  bimetallism,  but  insisting  that  the  policy  was 
proper  only  in  the  event  of  international  action  embrac- 
ing practically  all  of  the  commercial  nations.  They 
cultivated  relations  with  similar  bodies  abroad,  and  were 
sufficient  in  number  when  acting  with  the  gold  standard 
advocates  in  the  two  leading  parties  to  thwart  the  efforts 
of  those  who  agitated  for  free  coinage  by  the  United 
States  alone.  These  bimetallists  naturally  labored  for 
and  fully  expected  another  conference,  basing  the  expec- 
tation upon  the  constantly  diminishing  gold  product, 
which  they  concluded  would  not  suffice  for  the  world's 
needs. 


THE  SILVER   QUESTION 


295 


STATISTICAL  RESUME 

(Amounts  in  millions) 

Production  of  Gold  and  Silver,  Ratio,  etc. 


World 

United  States 

Ratio 

Bullion 

Value  of 

Silver 

Dollar 

Year 

Gold 

Silver 

Gold 

Silver 

Price  of 
Ounce  of 

Commer- 
cial 
Value 

Coin- 
ing 
Value 

Commer- 
cial 
Value 

Coin- 
ing 
Value 

Silver 

1861  .     . 

123 

46 

46 

43 

2 

2 

^•S0 

$  I.031 

*  1-333 

1862 .     . 

123 

48 

46 

39 

5 

5 

'5-35 

1. 04 1 

1.346 

1863.     . 

123 

48 

46 

40 

9 

9 

'5-37 

I.040 

1-345 

1864 .     . 

123 

48 

46 

46 

II 

11 

'5-37 

I.O40 

1-345 

1865.     . 

123 

47 

46 

53 

12 

11 

15-44 

»°35 

1-338 

1866.     . 

130 

58 

56 

54 

IO 

10 

'5-43 

1.036 

1-339 

1867.     . 

130 

'     57 

56 

52 

14 

14 

15-57 

1.027 

1.328 

1868 .     . 

130 

57 

56 

48 

12 

12 

J5-59 

1.025 

1.326 

1869.     . 

130 

57 

56 

50 

12 

12 

15.60 

1.024 

1-325 

1870.     . 

130 

57 

56 

5° 

17 

16 

'5-57 

1.027 

1.328 

1871  .     . 

Il6 

84 

82 

44 

24 

23 

»5-57 

1.025 

1.326 

1872.     . 

Il6 

84 

82 

36 

29 

29 

15-63 

1.022 

J-332 

1873.     . 

96 

82 

82 

36 

36 

36 

15-93 

1.004 

1.298 

1874.     . 

91 

7i 

72 

34 

37 

37 

16.16 

•989 

1.279 

I875.     • 

98 

78 

8l 

33 

3i 

32 

16.64 

.961 

1.242 

1876.     . 

104 

78 

88 

40 

35 

39 

1 7-75 

.900 

1. 164 

1877.     . 

114 

75 

81 

47 

37 

40 

17.20 

•93° 

1.202 

1878.     . 

119 

85 

95 

5i 

40 

45 

17.12 

•932 

I-I54 

296 


CONTEST  FOR  SOUND  MONEY 


Exports  and  Imports  of  Specie,  and  Coinage 


Fiscal 
Year 

Gold 

Silver 

Coinage  of 

Exports 

Imports 

Excess 
+  Imp. 
—  Exp. 

Exports 

Imports 

Excess 
+  Imp. 
-Exp. 

Gold 

Silver1 

1861   .  . 

27 

42 

+  15 

2 

4 

+  2 

83 

4 

1862 

35 

14 

—  21 

I 

3 

+  2 

21 

1863 

62 

6 

-56 

2 

4 

+  2 

22 

1864 

101 

11 

-90 

5 

2 

-  3 

20 

1865 

58 

6 

-52 

9 

3 

-  6 

28 

1866 

7i 

8 

-63 

15 

3 

—  12 

31 

1867 

39 

17 

—  22 

22 

5 

-17 

24 

1868 

73 

9 

-64 

21 

5 

-16 

19 

1869 

36 

14 

—  22 

21 

6 

-«5 

18 

1870 

34 

12 

—  22 

25 

14 

—  11 

23 

1871 

67 

7 

-60 

32 

14 

-18 

•   21 

3 

1872 

50 

9 

-41 

30 

5 

-25 

22 

3 

1873 

45 

9 

-36 

40 

13 

-27 

57 

4 

1874 

34 

20 

-I4 

33 

9 

-24 

35 

7 

1875 

67 

14 

-53 

25 

7 

-18 

33 

»5 

1876 

3i 

8 

-23 

25 

8 

-17 

47 

25 

1877 

26 

26 

—  0 

30 

'5 

-15 

44 

28 

1878 

9 

13 

+  4 

25 

16 

-  9 

5° 

29 

1  Coinage  of  dollars  prior  to  1878  amounted  to  3,900,000,  of  which 
2,500,000  were  coined  from  1871  to  1873. 


CHAPTER  XIII 

1879   TO    I89O 

The  silver  men  in  Congress  were  by  no  means  satis-  Silver  asita- 
fied  with  the  Bland-Allison  law,  and  during  the  summer  tiuues. 
of  1878  the  subject  was  agitated  in  the  political  field.  The 
Republican  platforms  favored  "  both  gold  and  silver," 
but  Western  Democrats  declared  persistently  for  free 
coinage,  as  did  the  "  Greenbackers."  The  congressional 
elections  resulted  rather  favorably  to  the  silver  advocates, 
but  they  were  unable  to  count  fully  on  their  forces. 

When  Hayes  sent  in  his  second  message  (December,  Hayes 
1878),  resumption  was  practically  at  hand.  He  said  free  silver, 
that,  with  views  unchanged,  he  had  had  the  silver  law 
of  1878  carried  out  faithfully,  to  afford  it  a  fair  trial. 
He  recommended  therefore  that  Congress  abstain  from 
disturbing  business  by  legislation  or  attempts  thereat, 
letting  the  people  have  an  opportunity  to  bring  about 
an  enduring  prosperity.       Sherman's  report,  however,  Sherman's 

,,,.,.  ....  .  .  r      -i  report,  1878. 

recommended  legislation  limiting  the  coinage  of  silver 
or  altering  the  ratio  to  make  the  silver  dollar  worth 
more.  He  assumed  that  Congress  had  not  intended  by 
the  act  of  1878  to  adopt  the  silver  standard,  but  as  far 
as  practicable  a  bimetallic  system,  with  limited  coinage. 
When  the  volume  of  dollars  more  than  supplied  the 
needs  for  such  coin,  he  thought  they  would  depreciate. 
The  facts  shown  by  the  market  quotations  warranted  a 
change  in  the  ratio.  To  ignore  this  would  mean  the 
absorption  of  the  surplus  silver  of  Europe.  He 
believed  in  fixing  a  ratio  that  would  secure  the  largest 

297 


298  CONTEST  FOR  SOUND  MONEY 

use  of  both  metals  without  displacing  either.  There- 
fore the  coinage  of  dollars  at  16  to  1  should  be  limited 
(say  to  $50,000,000)  until  the  price  of  silver  assumed  a 
definite  ratio  to  gold,  and  then  that  ratio  should  be 
adopted. 

While  maintaining  that  the  resumption  act  contem- 
plated redemption  of  notes  in  gold,  he  would  use  either 
metal,  as  holders  of  notes  might  demand,  reserving  the 
legal  option,  however,  to  pay  in  either. 

Price  of  At  this  time  the  ratio  of  silver  to  gold  was  (average) 

17.92,  and  the  bullion  value  of  the  silver  dollar  93.2 
cents. 

In  February  a  bill  to  make  gold  and  silver  coin  inter- 
changeable was  defeated  in  the  House,  101  to  136;  one 
to  pay  out  legal  tender  notes  for  any  coin  brought  to 
the  subtreasury  in  New  York,  by  105  to  129;  bills  to 
redeem  trade  dollars  and  recoin  them  into  standard 
dollars  were  also  defeated. 

House  favors  In  the  following  Congress,  the  first  session  of  which 
assembled  in  March,  a  free  coinage  measure,  reported 
by  A.  J.  Warner,  (Dem.,  O.),  passed  the  House  by 
114  to  97,  6  Republicans  favoring  and  8  Democrats 
opposing  it.  An  attempt  to  limit  the  coinage  to  domes- 
tic product  was  defeated  by  105  to  130,  and  one  to  pro- 
vide for  a  460-grain  dollar  by  52  to  176.  A  proposition 
to  make  gold  and  silver  certificates  legal  tender  was 
negatived  by  73  to  135. 

Senate  in  the  Senate  the  free  coinage  bill  was  sent  to  the 

Finance  Committee,  from  which  it  was  reported  ad- 
versely by  Senator  Bayard  at  the  following  session,  and 
a  resolution  by  Senator  Vest  (Dem.,  Mo.),  declaring 
free  coinage  necessary  to  supply  the  needed  volume 
of  money,  was  sent  to  the  same  committee,  for  burial, 
by  a  vote  of  23  to  22,  4  Eastern  Democrats  voting  with 
the  majority. 


THE  SILVER   QUESTION  299 

The  House  passed  a  resolution,  with  considerable 
support  from  the  Republican  side,  directing  the  Secre- 
tary of  the  Treasury  to  pay  out  the  silver  dollars  in  the 
Treasury  the  same  as  gold;  the  vote  was  143  to  75. 

A  bill  was  passed  at  this  session  (June  9,  1879),  for 
the  redemption  of  subsidiary  coin  in  lawful  money  and 
for  its  issue  for  lawful  money  in  sums  or  multiples  of 
$20.  This  action  was  due  to  the  existence  of  a  trouble- 
some surplus  of  such  coin  caused,  not  by  excessive 
coinage,  but  by  the  return  from  abroad  of  pieces  of 
the  old  coinage  banished  during  the  war  period. 

At  this  time  a  bill  proposing  a  solution  of  the  silver 
question  by  the  minting  of  a  "goloid  "  dollar  containing 
both  metals,  was  favored  by  Stephens  (Dem.,  Ga.),  for- 
merly Vice-President  of  the  Southern  Confederacy.  It 
proposed,  also,  to  adopt  the  system  for  international  use 
by  coining  a  four-dollar  piece.  The  measure  never  got 
beyond  the  committee  stage. 

In  his  report  for  i879  Secretary  Sherman  repeated  Sherman's 

1  •  i      •  r      1  •  -kt  rr  report,  1875 

his  recommendations  01  the  previous  year.  No  effort 
had  been  spared  to  put  silver  into  circulation,  but  only 
1 3,000,000  of  the  dollars  were  then  in  use  out  of  a  coin- 
age of  45,000,000.  The  coin  could  be  maintained  at 
par  only  by  holding  a  great  part  of  it  in  the  vaults  of 
the  Treasury.  He  urged  limitation  of  the  coinage  to 
preserve  the  parity  with  gold. 

President  Hayes  recommended  that  the  Treasury  be 
authorized  to  suspend  coinage  of  silver  when  parity  was 
endangered.  He  expressed  the  belief  that  international 
agreement  upon  a  ratio  was  possible,  and  hoped  no  legis- 
lation other  than  that  recommended  be  undertaken,  in 
order  to  avoid  disturbances. 

Congress,  in  appropriation   acts   now,  and    annually  Freedistri- 

7  •  *     ,   r         ,        1.       .,       •  r  c  butionof 

thereafter,  provided  for  the  distribution,  free  01  expense,   dollars. 
of  silver  dollars  from   mints  and  Treasury  offices,  the 


300 


CONTEST  FOR  SOUND  MONEY 


Greenback- 
silver  alli- 
ance. 


Continued 
inflation. 


cost  to  be  charged  against  the  "  silver  profit  fund  "  ;  i.e. 
the  amount  representing  the  difference  between  the  cost 
of  the  bullion  and  the  nominal  value  of  the  dollars 
coined  therefrom,  sometimes  also  called  "seigniorage." 

The  Senate,  also  Democratic,  nevertheless  contained 
a  sufficient  number  of  anti-silver  Democrats  from  the 
East  to  defeat  any  free  silver  measure,  hence  no  further 
attempts  were  made  to  press  such  bills.  But  Repre- 
sentative Weaver  of  Iowa,  later  Greenback  candidate  for 
the  presidency,  offered  in  the  House  a  proposition  to 
redeem  bonds  in  silver,  opening  the  mints  to  the  free 
coinage  of  silver  to  provide  means.  This  was  defeated 
85  to  117.  The  substance  thereof  became  one  of  the 
cardinal  principles  announced  in  the  platform  of  that 
party  in  the  summer  of  1880. 

The  principal  parties  omitted  silver  from  their  plat- 
forms in  the  presidential  contest  of  1880.  It  was  an 
important  and  exciting  issue,  however,  in  very  many 
congressional  districts.  Garfield,  conspicuous  for  sound 
money  views,  was  elected  President,  and  with  him  a 
Republican  Congress. 

In  his  report  for  1880,  Secretary  Sherman  stated  that 
the  amount  of  silver  was  already  in  excess  of  the  demand. 
Popular  objection  to  the  dollars  arose  from  their  bulk 
and  their  known  deficiency  in  value.  Less  than 
$26,000,000  were  in  use  out  of  nearly  $73,000,000 
coined,  and  less  than  $20,000,000  were  floated  by  rep- 
resentative certificates,  thus  leaving  $27,000,000  idle  in 
the  Treasury —  almost  the  year's  coinage.  The  average 
bullion  value  of  the  dollars  was  about  88|  cents.  Sher- 
man had  adopted  a  policy  of  furnishing  silver  certificates, 
free  of  exchange  charge,  at  Southern  and  Western  points, 
for  deposits  of  gold  at  New  York. 

President  Hayes  forcibly  urged  suspension  of  coinage 
in  his  message  for  1880.     It  was  demonstrated  that  the 


THE  SILVER   QUESTION  30 1 

coinage  law  of  1878  would  not  raise  the  commercial  value 
of  silver,  indeed  its  price  had  fallen.  He  also  recom- 
mended increasing  the  amount  of  silver  in  the  dollar. 

With  the  silver  situation  thus  remaining  undetermined,  Silver  asita- 
and  the  conditions  in  France,  Italy,  India,  and  other  coun- 
tries becoming  more  serious  owing  to  the  steadily  dimin- 
ishing supply  of  gold  and  the  steadily  falling  price  of 
silver,  opinion  in  both  England  and  Germany  underwent 
a  change.  Leading  advocates  of  the  single  gold  standard 
altered  their  views.  France  now  consented  to  join  this 
country  in  an  invitation  to  another  conference  to  devise 
a  "  system  for  the  establishment  by  means  of  an  interna- 
tional agreement  of  the  use  of  gold  and  silver  as  bimetal- 
lic money,  according  to  a  settled  relative  value  between 
these  two  metals."     (The  ratio  was  now  about  18  to  1.) 

The  conference  met  at  Paris  in  April,  1881.1  international 

conference 

England,  on  account  of  India,  was  seriously  interested,  of  l88l 
and  Germany  was  also  represented.  In  all,  eighteen 
countries  sent  delegates,  our  own  being  ex-Secretary  of 
State  William  M.  Evarts  (N.Y.),  ex-Senators  Allen  G. 
Thurman  (O.)  and  Timothy  O.  Howe  (Wis.),  with  S. 
Dana  Horton  as  expert.  The  membership  of  the  con- 
ference in  general  was  more  favorable  to  bimetallism 
than  the  previous  one. 

The  questions  considered  were  concisely  these :  — 

Has  the  fall  of  silver  been  hurtful  to  prosperity ;  is  it 
desirable  that  the  relation  be  made  more  stable  ? 

Has  the  fall  been  due  to  increased  product  or  to  legis- 
lation ? 

Can  stability  be  restored  if  a  large  group  of  states 
remonetize  silver  under  unlimited  coinage  of  full  legal 
tender  pieces  ? 

If  so,  what  measures  should  be  taken  to  reduce  fluctua- 
tion of  the  ratio  to  a  minimum  ? 

1  International  Monetary  Conference,  1881,  House  Misc.  Doc,  No.  396, 
49th  Congress,  1st  Sess. 


302 


CONTEST  FOR  SOUND  MONEY 


Declaration 
of  the  pro- 
silver  dele- 
gates. 


Suspension 
of  coinage 
urged. 


It  was  apparent  that,  as  before,  most  of  the  Euro- 
peans imagined  the  United  States  interested  because  she 
was  a  great  producer  of  silver.  Germany  at  this  time 
still  had  a  very  large  stock  of  its  old  coins  unsold.  Great 
Britain,  on  account  of  India,  showed  a  desire  to  have  all 
others  extend  the  use  of  silver  in  order  to  raise  the  price. 

Long  intervening  recesses  prolonged  the  conference 
until  July.  France  and  the  United  States  finally  joined 
in  a  declaration  answering  the  questions  practically 
thus  :  — 

That  the  fall  of  silver  was  injurious  and  establishing 
a  fixed  ratio  would  be  beneficial ;  international  agreement 
for  free  and  unlimited  coinage  of  both  metals  at  a  fixed 
ratio  would  cause  and  maintain  stability ;  the  ratio  of 
15I  to  1  was  most  suitable;  England,  France,  Germany, 
and  the  United  States,  with  the  concurrence  of  others, 
could  by  convention  secure  and  maintain  the  stability  of 
the  ratio  adopted. 

Germany  and  England  declined  to  enter  into  such  a 
compact.  The  conference  adjourned  for  politeness'  sake 
to  April  12,  1882  — to  enable  France  and  this  country  to 
work  out  a  plan.  Actually  as  it  proved  the  adjournment 
was  sine  die. 

Opinion  here  now  took  in  large  measure  the  view,  as 
Secretary  Folger  expressed  it  in  his  report  for  1881,  that 
Europe  was  in  fact  more  deeply  interested  in  the  solu- 
tion of  the  silver  question  than  the  United  States,  that 
therefore  the  suspension  of  all  coinage  by  us  would  tend 
toward  the  adoption  of  the  bimetallic  policy.  Folger 
urgently  recommended  such  action,  since  the  supply  of 
dollars  was  now  in  excess  of  the  home  demand,  and 
further,  coinage  would  bring  us  to  the  single  standard. 
He  had  been  able  to  increase  the  dollars  in  use  to 
$34,000,000,  the  certificates  to  $59,000,000,  leaving  in 
the  Treasury  some  $1 1,000,000  net  of  silver  funds. 


THE  SILVER   QUESTION  303 

In  January,  1882,  Congress  called  for  a  report  upon  statistical, 
silver  purchases,  which  when  furnished  showed  that 
92,550,000  fine  ounces  had  been  acquired  at  a  cost  of 
$95,119,000,  producing  105,380,000  silver  dollars.  The 
Treasury  had  in  the  forty-six  months  bought  only  the 
minimum  amount  fixed  by  the  law. 

In  the  House  an  attempt  was  made  under  the  lead  of 
Dingley  (Rep.,  Me.),  to  suspend  coinage  of  silver  and  the 
issue  of  silver  certificates,  but  it  failed. 

The  act  of  July  12,  1882,  authorized  the  issue  of  gold 
certificates,  and  made  these  as  well  as  silver  certificates 
available  for  bank  reserves.  It  also  prohibited  any 
national  bank  from  being  a  member  of  any  clearing- 
house where  silver  certificates  were  refused  in  settlement 
of  balances. 

In  1882  Folger  had  been  able  to  put  into  circulation  Further 
only  about  1,000,000  silver  dollars,  and  the  silver  certifi-  silver  impos- 
cates  in   use  were   less  than  the   year   before,  so  that  sible- 
practically  the  entire  purchase  of   silver  for  the  year, 
some  $27,000,000,  was  idle  in  the  Treasury,  having  dis- 
placed gold  or  legal  tenders  to  that  extent. 

The  well-known  opposition  of  President  Arthur  made 
further  efforts  to  pass  a  free  coinage  measure  useless, 
and  no  attempt  was  for  a  time  made  in  that  direction ; 
but  the  silver  advocates  tried  to  enact  a  law  for  the  re- 
demption of  trade  dollars  and  their  recoinage  into  the 
ordinary  form.     The  bill  failed  in  the  Senate. 

McCulloch  became  Secretary  near  the  end  of  1884,  Gold  reserve 
which  gave  him  an  opportunity  to  point  out  vigorously 
the  danger  threatening  the  country  from  silver.  A  be- 
liever in  bimetallism  under  international  agreement,  he 
nevertheless  saw  the  futility  of  the  policy  now  obtaining 
in  the  United  States.  A  continuation  of  this  policy 
would  either  impair  the  gold  reserve  or  compel  the  use  * 
of  silver  for  payment  of  gold  obligations,  thus  bringing 


3<M 


CONTEST  FOR  SOUND  MONEY 


President 

Cleveland's 

views. 


McCulloch 
to  Congress. 


about  the  silver  standard.  The  silver  funds  in  the 
Treasury  had  increased  to  $53,000,000.  The  reduction 
of  tariff  and  other  taxes  by  the  act  of  March  3,  1883, 
caused  a  temporary  shrinkage  of  revenues  which  pres- 
ently made  it  much  more  difficult  to  carry  a  large  vol- 
ume of  idle  silver. 

The  annual  gold  product  of  the  world  had  now  fallen 
below  $100,000,000  and  that  of  silver  was  over  $115,- 
000,000,  the  United  States  furnishing  $30,000,000  of 
the  former  and  $46,000,000  of  the  latter. 

Grover  Cleveland  had  been  elected  President,  and  a 
portion  of  his  party  was  definitely  opposed  to  silver. 
Anticipating  that  he  would  in  his  inaugural  express 
himself  hostile  to  silver,  95  Western  Democrats  early  in 
1885  addressed  a  letter  requesting  him  not  to  do  so. 
He  replied  (February  24),  forcibly  declaring  his  belief 
that  a  financial  crisis  would  follow  a  continuance  of  the 
coinage  of  silver ;  that  the  gold  reserve  was  practically 
already  impaired.  The  silver  advocates  retorted  by 
pointing  out  that  France  with  $850,000,000  gold  main- 
tained $600,000,000  silver;  we  had  $600,000,000  gold 
and  only  $200,000,000  silver,  and  if  the  Secretary  of  the 
Treasury  would  only  pay  out  more  silver  and  less  gold, 
the  gold  reserve  would  not  be  endangered. 

The  silver  advocates  persisted  in  the  belief  that  the 
Treasury  was  not  only  indifferent  in  getting  silver  into 
circulation,  but  were  inclined  to  the  opinion  that  obsta- 
cles were  actually  placed  in  the  way.  In  February, 
1885,  the  House  passed  a  resolution  asking  the  Secre- 
tary of  the  Treasury  a  number  of  questions  on  the  sub- 
ject, designed  to  inform  the  House  as  to  the  action  of 
his  department.  Secretary  McCulloch  replied  frankly, 
demonstrating  not  only  that  both  dollars  and  certificates 
were  paid  out  as  largely  as  was  possible,  but  showing 
that  both  forms  returned  to  the  Treasury  in  the  reve- 


THE  SILVER   QUESTION  305 

nues  as  fast  as,  and  sometimes  in  greater  volume  than, 
he  disbursed  them  ;  40  per  cent  of  the  customs  revenue 
was  now  paid  in  silver  certificates ;  the  gold  currency 
was  preferred,  and  was  very  largely  withheld  in  pay- 
ment of  taxes  and  duties ;  the  silver  issue  had  reached 
the  saturation  point.  Yet  upon  this  showing  the  House 
refused,  in  the  same  month,  to  suspend  the  further  coin- 
age of  dollars,  118  to  152,  and  again  in  different  form 
by  90  to  169.  So  the  Treasury  was  compelled  to  pay 
out  current  money  and  increase  its  supply  of  those  forms 
which  were  not  current.  The  country  barely  escaped 
going  upon  a  silver  basis. 

President  Cleveland  and  his  Secretary  of  the  Treas-  Manning's 
ury,  Manning,  immediately  adopted  vigorous  measures  measures. 
to  prevent  a  catastrophe.  By  at  once  curtailing  the 
issue  of  small  legal  tender  notes  (which  was  in  the  dis- 
cretion of  the  Secretary),  room  was  made  for  a  larger 
volume  of  silver  dollars ;  by  using  legal  tender  notes  in 
disbursements,  and  avoiding  when  possible  the  payment 
of  silver  certificates,  a  smaller  proportion  of  the  revenues 
was  received  in  that  form  ;  and  the  gold  reserve,  which 
in  May  had  fallen  to  $1 15,000,000,  was  increased.  Sec- 
retary Manning  also  acquired  from  the  New  York  banks 
nearly  $6,000,000  in  gold  in  exchange  for  subsidiary 
silver  coin,  of  which  there  was  a  surplus  on  hand.  By 
suspending  bond  purchases  the  Treasury  by  December 
had  $148,000,000  gold  in  its  reserve,  and  also  over 
$76,000,000  of  idle  silver.  These  makeshifts  served  to 
tide  over  the  interval  until  the  regular  session  of  Con- 
gress, to  which  Secretary  Manning,  in  his  report  (Decem- 
ber, 1885),  presented  an  exhaustive,  learned  review  of  the 
silver  question. 

He  urged  a  suspension  of  the  coinage  of  dollars  in  Suspension 
order  that  the  status  of  silver  might  become  more  defi-  advocated, 
nitely  determined.     The  country  had  now  215,000,000 
x 


3o6 


CONTEST  FOR  SOUND  MONEY 


International 

agreement 

impossible. 


Congress 

interpellates 

Manning. 


of  the  dollars  which  could  be  maintained  at  parity  only 
by  stopping  further  output ;  to  continue  the  coinage 
under  existing  conditions  was  merely  inviting  disaster. 

President  Cleveland  devoted  several  pages  to  the  sub- 
ject in  his  first  message.  He  asserted  that  the  vital  part 
of  the  act  of  1878  was  that  looking  to  an  international 
bimetallic  agreement ;  that  endeavors  in  this  line  had 
failed,  thus  leaving  the  United  States  alone  to  battle 
for  silver  —  a  losing  contest.  An  examination  of  con- 
ditions abroad  convinced  him  that  no  help  was  to  be 
expected  so  long  as  the  present  policy  was  persisted  in. 
Indeed,  the  further  accumulation  of  dollars  at  the  pecul- 
iar ratio  of  16  to  1,  not  anywhere  else  in  use,  made  the 
chance  for  an  agreement  more  remote.  The  supply  of 
dollars  now  far  exceeded  the  demand.  By  suspending 
further  coinage,  however,  these  might  be  ultimately 
absorbed  in  the  circulation.  The  plea  that  the  continua- 
tion was  for  the  benefit  of  the  "  debtor  class  "  implied 
that  this  class  was  dishonest,  which  he  denied ;  nor 
would  a  depreciated  dollar  help  them  in  the  end. 

In  Europe  a  marked  depression  in  trade  became 
manifest  at  this  time.  In  England  a  commission  was 
appointed  to  examine  the  subject,  and  out  of  this  came 
eventually  a  gold  and  silver  commission.  In  other 
nations  also  the  question  of  silver  was  being  considered. 

Congress  had  again  called  upon  the  Treasury  for  a 
full  report  as  to  its  action  respecting  silver,  to  which 
Secretary  Manning  replied  (March  3,  1886).  The 
questions  embraced  the  authority  for  the  loan  of  gold 
from  the  New  York  banks,  the  amount  of  free  silver  in 
the  Treasury,  and  bonds  subject  to  redemption  not  paid, 
implying  that  the  silver  could  have  been  used  for  the 
payment  of  debt,  and  finally  asking  as  to  the  future 
policy. 

Secretary  Manning  replied  that  the  loan  of  gold  by 


THE  SILVER   QUESTION  307 

the   New  York   banks  was  made   by  placing  at   their  Manning's 
disposal  subsidiary  silver.     He  referred  to  no  authority         '     . 
therefor,  as  the  transaction  was  regarded  as  an  exchange 
presumably  permitted  by  the  act  of  1879. 

He  further  stated  that  there  had  been  no  disparage- 
ment of  any  form  of  money  by  the  Treasury ;  each 
citizen  was  paid  his  choice  of  currencies  on  hand.  He 
had  by  much  labor  increased  the  circulation  of  silver 
dollars  by  $11,500,000.  He  pointed  out  that  silver 
certificates,  if  issued  beyond  the  actual  needs,  would 
necessarily  flow  back  into  the  Treasury,  and  silver  dol- 
lars would  not  circulate  if  one  and  two  dollar  notes 
were  furnished.  Interest-bearing  debt  subject  to  call 
amounted  to  $174,000,000,  but  to  force  silver  out  for 
this  would  precipitate  the  silver  basis.  On  the  other 
hand,  there  was  $346,000,000  of  debt  in  the  shape  of 
legal  tender  notes,  the  payment  of  which  had  been 
pledged  in  1869,  but  which  under  the  act  of  May  31, 
1878,  he  was  compelled  to  reissue  when  paid.  These 
could  be  replaced  by  silver  certificates. 

The  country  desired  to  remain  bimetallic ;  free  coin-  silver 

,  .  ..  riT-^i         •  ii    monometal- 

age,  or  the  continuation  01  the  limited  coinage,  would  iiSm  immi- 
bring  silver  monometallism,  under  which  all  the  surplus  nent. 
silver  of  Europe  would  ultimately  come  here  for  gold. 
Discontinuing  the  coinage  was  the  only  thing  that  would 
destroy  their  hopes  of  doing  so.     Until  the  coinage  was 
discontinued  it  was  useless  to  talk  of  bimetallism. 

The  sole  action  taken  by  Congress  was  to  authorize 
the  issue  of  silver  certificates  of  the  denominations  of 
$1,  $2,  and  $5,  by  an  amendment  tacked  to  an  appro- 
priation act. 

Congress  endeavored  to  force  Manning  to  use  the 
accumulating  surplus  in  the  purchase  of  bonds,  but  he 
felt  that  unless  he  was  able  to  hold  a  large  surplus,  he 
would  be  hampered  by  the  large  silver  balance. 


3o8 


CONTEST  FOR  SOUND  MONEY 


Small  silver 
certificates. 


Fairchild's 
report. 


In  his  report  for  1886  Manning  reviewed  the  silver 
question  at  home  and  abroad,  and  again  concluded  that 
the  only  hope  lay  in  the  cessation  of  silver  purchases 
under  the  act  of  1878,  thereby  causing  a  change  of 
sentiment  in  Europe,  which  was  content  to  look  on 
while  we  carried  the  load. 

Opinion  in  Europe  was  undergoing  a  change :  243 
members  of  the  British  Parliament  had  petitioned  that 
the  Gold  and  Silver  Commission  inquire  into  the  subject 
and  suggest  remedies  to  be  obtained  either  by  sole  or 
concurrent  action  by  the  British  government.  The  fall 
of  prices  was  having  its  influence.1 

The  issue  of  small  silver  certificates  had  begun,  and 
the  $1  and  $2  greenbacks  were  disappearing.  There 
had  been  a  contraction  of  the  currency  in  circulation 
this  year  from  $23.02  per  capita  to  $21.82. 

President  Cleveland  in  his  message  for  1886  contin- 
ued his  recommendation  to  cease  purchasing  silver, 
pointing  out  that  as  this  form  of  currency  was  distrib- 
uted among  the  people,  the  duty  of  protecting  it  from 
disaster  became  greater. 

On  March  3,  1887,  an  act  was  passed  (becoming  law 
without  the  President's  signature)  to  redeem  trade  dollars, 
not  mutilated,  for  a  period  of  six  months;  $7,689,000  were 
so  redeemed  and  recoined  into  dollars  and  smaller  pieces. 

In  1887  Secretary  Fairchild,  concluding  that  the  sil- 
ver acquisition  would  not  be  stopped,  looked  for  meas- 
ures to  make  it  safer.  The  silver  dollars  in  use  had 
grown  to  $62,500,000,  although  in  the  dull  seasons 
that  amount  usually  shrunk  some  $7,000,000;  the 
Treasury  had  only  $53,000,000  in  its  vaults  not  held  for 
certificates,  against  nearly  $94,000,000  in  July,  1886  ;  and 
the  small  silver  certificate  issue  had  enlarged  the  total 
issue  to  nearly  $161,000,000.     The  bullion  value  of  the 

1  Russell,  International  Monetary  Conferences. 


THE  SILVER   QUESTION  309 

dollar  had  fallen  to  75  cents.  The  slight  increase  in 
the  world's  gold  product  was  accompanied  by  a  greater 
increase  in  the  silver  product,  resulting  in  a  commercial 
ratio  of  21  to  1. 

Europe  had  again  been  sounded  as  to  international 
action,  but  entirely  without  result.  Edward  Atkinson, 
the  delegate,  returned  without  the  slightest  hope  of  the 
success  of  the  movement  in  Europe.  President  Cleve-  Treasury 
land  had,  however,  taken  strong  ground  favoring  the  tariff.US  an 
reduction  of  tariff  taxes  to  check  the  growing  surplus. 
This  surplus  could  be  used  only  in  redemption  of  bonds, 
which  meant  retiring  national  bank  currency,  leaving 
in  turn  a  "  vacuum "  for  gold  or  silver.  Even  if  the 
tariff  were  lowered,  the  increased  imports  of  goods  would 
tend  to  cause  exports  of  gold  and  the  vacuum  would  have 
to  be  filled  by  silver.  Europe  did  not  fail  to  see  this  and 
awaited  the  issue.  No  legislation  followed,  but  the  dis- 
cussion served  to  keep  silver  in  the  background,  although 
in  the  presidential  campaign  of  1888  silver  took  a 
more  prominent  position  than  ever  before.  The  Repub- 
licans denounced  Cleveland's  policy  as  an  attempt  at 
silver  demonetization.  The  majority  of  the  Democrats, 
favorable  to  silver,  were  yet  unable  to  dictate  the  plat- 
form, and  appreciating  the  necessity  of  renominating 
Cleveland,  their  declaration  was  drawn  by  the  eastern 
wing  of  the  party.     It  favored  both  "gold  and  silver." 

Harrison  defeated  Cleveland,  and  his  administration 
was  tacitly  pledged  to  "do  something  for  silver." 

In  1 888  the  report  of  the  British  Commission  appeared.1  British  silver 

rj,,  .    .  r  ..  .  .      .  .  commission 

The  opinion  of  the  twelve  commissioners  was  unanimous  report. 
as  to  the  causes  of  the  disturbance  of  the  bimetallic  par 
and  the  disastrous  fall  in  prices  resulting.    They  said  :  — 

"The  action  of  the  Latin  Union  in  1873   broke   the   link  Cause  of  fall 
between   silver  and   gold,  which   had   kept  the   price  of  the  ofsilver- 
1  See  Senate  Misc.  Doc,  No.  34,  50th  Congress,  2d  Sess. 


310  CONTEST  FOR  SOUND  MONEY 

former,  as  measured  by  the  latter,  constant  at  about  the  legal 
ratio ;  and  when  this  link  was  broken  the  silver  market  was 
open  to  the  influence  of  all  the  factors  which  go  to  affect  the 
price  of  a  commodity.  These  factors  happen  since  1873  to 
have  operated  in  the  direction  of  a  fall  in  the  gold  price  of  that 
metal,  and  the  frequent  fluctuations  in  its  value  are  accounted 
for  by  the  fact  that  the  market  has  become  fully  sensitive  to  the 
other  influences  to  which  we  have  called  attention  above," 

viz.  the  great  increase  in  production  of  silver  and  dimi- 
nution of  the  gold  product,  increased  use  of  gold  and 
diminished   use   of    silver,    resulting   from   changes  in 
currency  systems,  the  sale  of  silver  by  Germany,  the! 
removal  of  the  steadying  force  of  the  Latin  Union. 

The  commis-       As  to  remedies,  the  commission  was  evenly  divided. 

ion  divided.  One-half  headed  by  Lord  Herschell  rejected  bimetallism 
and  recommended  no  change  in  the  British  system. 
They  said :  — 

"  In  our  opinion  it  might  be  worth  while  to  meet  the  great 
commercial  nations  on  any  proposal  which  would  lead  to  a 
more  extended  use  of  silver,  and  so  tend  to  prevent  the  appre- 
hended further  fall  in  the  value  of  that  metal,  and  to  keep  its 
relation  to  gold  more  stable. 

********** 

"  Though  unable  to  recommend  the  adoption  of  what  is  com- 
monly known  as  bimetallism,  we  desire  it  to  be  understood  that 
we  are  quite  alive  to  the  imperfections  of  standards  of  value, 
which  not  only  fluctuate,  but  fluctuate  independently  of  each 
other ;  and  we  do  not  shut  our  eyes  to  the  possibility  of  future 
arrangements  between  nations  which  may  reduce  these  fluctua- 
tions. 

"  One  uniform  standard  for  all  commercial  countries  would 
rio  doubt,  like  uniformity  of  coinage  or  of  standards  of  weight 
and  measure,  be  a  great  advantage.  But  we  think  that  any 
premature  and  doubtful  step  might,  in  addition  to  its  other 
dangers  and  inconveniences,  prejudice  and  retard  progress  to 
this  end. 


THE  SILVER   QUESTION  311 

"  Under  these  circumstances  we  have  felt  that  the  wiser  course 
is  to  abstain  from  recommending  any  fundamental  change  in 
a  system  of  currency  under  which  the  commerce  of  Great  Brit- 
ain has  attained  its  present  development." 

The  other  half  of  the  commission  contended  that  if  One-half 
the  Latin  Union's  system  of  bimetallism  had  steadied  bimetallism. 
the  bullion  market,  as  admitted,  such  a  system  of  free 
coinage  by  all  nations  upon  an  agreed  ratio  certainly 
would.     Tbey  said  :  — 

"  Neither  metal  alone  exists  in  sufficient  quantity  to  serve  as 
a  sole  standard  without  causing  such  a  change  in  the  level  of 
prices  as  to  amount  to  a  financial  and  commercial  revolution ; 
but  we  cannot  doubt  that  if  a  sufficiently  wide  area  of  agree- 
ment between  the  leading  commercial  countries  can  be  secured, 
this  most  important  result  may  be  effectually  attained  and  a 
great  international  reform  successfully  accomplished. 

********** 

"Failing  any  attempt  to  reestablish  the  connecting  link 
between  the  two  metals,  it  seems  probable  that  the  general 
tendency  of  the  commercial  nations  of  the  world  will  be  towards 
a  single  gold  standard. 

"  Any  step  in  that  direction  would,  of  course,  aggravate  all 
the  evils  of  the  existing  situation,  and  could  not  fail  to  have  a 
most  injurious  effect  upon  the  progress  of  the  world. 

"  A  further  fall  in  the  value  of  silver  might  at  any  moment 
give  rise  to  further  evils  of  great  and  indefinite  magnitude  in 
India,  while  a  further  rise  in  the  value  of  gold  might  produce 
the  most  serious  consequences  at  home. 

"  No  settlement  of  the  difficulty  is,  however,  in  our  opinion, 
possible  without  international  action. 

"  The  remedy  which  we  suggest  is  essentially  international   Remedy  sug- 
in  its  character,  and  its  details  must  be  settled  in  concert  with  &ested- 
the  other  powers  concerned. 

"  It  will  be  sufficient  for  us  to  indicate  the  essential  features 
of  the  agreement  to  be  arrived  at,  namely,  (1)  free  coinage  of 
both  metals  into  legal  tender  money;  and  (2)  the  fixing  of  a 
ratio  at  which  the  coins  of  either  metal  shall  be  available  for 
the  payment  of  all  debts  at  the  option  of  the  debtor. 


312  CONTEST  FOR  SOUND  MONEY 

"  We  therefore  submit  that  the  chief  commercial  nations  of 
the  world,  such  as  the  United  States,  Germany,  and  the  States 
forming  the  Latin  Union,  should  in  the  first  place  be  consulted 
as  to  their  readiness  to  join  with  the  United  Kingdom  in  a  con- 
ference, at  which  India  and  any  of  the  British  colonies  which 
may  desire  to  attend  should  be  represented,  with  a  view  to 
arrive,  if  possible,  at  a  common  agreement  on  the  basis  above 
indicated." 

One  of  the  six  reporting  against  bimetallism  later 
came  out  strongly  in  favor  of  it.1 

The  document  was  a  lengthy  and  scholarly  produc- 
tion; its  burden  was  naturally  India  and  her  relations 
to  the  mother  country.     Congress  ordered  it  printed  for 
distribution  here,  and  it  gave  both  the  international  bi- 
metallists  and  the  free  coinage  advocates  much  material . 
for  study  and  discussion. 
Silver  certifi-       By   1 888    the  national  bank  circulation  had  largely 
place  bank-     made  way  for  silver  certificates.     Nearly  $230,000,000 
notes.  0f  the  latter  were  now  in  existence  ;  about  60,000,000  of 

the  dollars  were  actually  in  circulation.  The  Treasury 
had  only  $30,000,000  free.  Gratifying  as  this  was  from 
one  point  of  view,  Fairchild  nevertheless  urged  action 
upon  his  previous  recommendations,  as  a  requisite  to 
remove  the  danger  of  going  to  a  depreciated  silver  basis. 
He  still  hoped  that  before  a  crisis  was  reached  inter- 
national action  would  relieve  the  situation.  The  feature 
of  the  Treasury  condition  which  attracted  most  attention 
was  the  rapid  increase  of  the  gold  reserve  which  had 
during  Fairchild's  term  gone  beyond  $200,000,000,  stand- 
ing at  the  end  of  March,  1888,  at  almost  $219,000,000. 
The  political  This  was  the  political  situation  respecting  silver :  A 
ver,  1889.  large  majority  of  the  Democrats  in  both  houses  of  Con- 
gress favored  free  coinage;  a  sufficient  number  of 
Republican  senators  were  also  pledged  to  that  policy  to 

1  Leonard  Courtney. 


THE  SILVER   QUESTION  313 

make  it  easy  to  pass  a  bill  through  the  Senate ;  in  the 
House  the  Republican  majority  was  small,  and  while  a 
large  majority  of  representatives  of  that  party  were 
opposed  to  free  coinage  and  a  lesser  number,  but  still  a 
majority,  were  opposed  to  enlarging  the  use  of  silver,  it 
was  clear  that  if  nothing  were  done  a  sufficient  number  of 
Republicans  would  join  the  silver  Democrats  in  passing 
a  free  coinage  law.  The  party  was  at  the  same  time 
pledged  to  tariff  legislation,  and  Harrison,  as  well  as 
McKinley,  who  was  the  House  leader,  deemed  the  tariff 
of  paramount  importance  and  believed  some  silver  leg- 
islation was  necessary  for  the  purpose  of  averting  free 
coinage  and  preventing  the  defeat  of  tariff  legislation. 
The  silver  Republicans  used  their  power  to  attain  their 
ends  without  disguise. 

The  task  of  meeting  the  political  exigency  fell  to 
Windom,  who  had  been  chosen  Secretary  of  the  Treas- 
ury by  Harrison. 

Windom's  Treasury  report  for  1889  included  a  most  Windom's 
elaborate  review  of  the  silver  question.  Silver  had  now  5^°^  °' 
fallen  so  that  the  ratio  was  22  to  1,  giving  the  silver 
dollar  a  bullion  value  of  about  72  cents.  The  world's 
product  of  gold  was  $123,000,000,  that  of  silver 
$155,000,000.  The  United  States  had  coined  343,500- 
000  silver  dollars,  of  which  only  60,000,000  were  in  use, 
but  277,300,000  were  in  the  Treasury  represented  by 
certificates,  leaving  free  in  the  Treasury  only  6,200,000. 

While  the  prediction  of  danger  from  our  financial 
policy  had  not  been  fulfilled,  it  was  due  to  favorable 
conditions  of  trade,  large  crops,  and  general  prosperity, 
which  served  to  postpone  the  crisis.  Silver  had  con- 
tinued to  fall  despite  the  large  purchases  by  the  gov- 
ernment. Adverse  action  by  the  nations  of  Europe 
and  increased  production  were  the  causes. 

It  had  proven  impossible  to  restore  bimetallism  single- 


3 14  CONTEST  FOR  SOUND  MONEY 

handed.     Gold  was  in  fact  our  standard,  and  silver  cir- 
culated only  by  force.     This  could  not  last. 
Proposed  The   solutions   proposed    were   (i)    an   international 

ineffective,  agreement,  which  it  had  been  urged  would  be  brought 
about  by  distress  in  Europe  due  to  falling  prices,  and 
would  be  accelerated  by  suspension  of  purchases  by  us 
(he  did  not  favor  such  a  dangerous  measure);  (2)  con- 
tinuing the  present  policy  of  buying  the  minimum  of 
$2,000,000  worth  monthly,  which  was  satisfactory  to 
no  one;  (3)  increasing  to  the  maximum  of  $4,000,000 
monthly  as  provided  in  the  law  of  1878,  urged  as  proper 
to  offset  the  contraction  of  currency  erroneously  sup- 
posed to  be  going  on,  when  in  fact  it  had  been  ex- 
panded nearly  $600,000,000,  or  $4.75  per  capita;  (this 
policy  would  not  raise  the  market  price  of  silvery; 
(4)  free  coinage  (this  would  surely  banish  gold,  thus  caus- 
ing contraction,  and  bring  the  country  upon  a  depreci- 
ated standard);  (5)  coining  heavier  dollars,  "honest 
dollars  "  (but  this  would  be  impracticable,  as  the  ratio 
fluctuated  too  frequently,  and  would  indefinitely  post- 
pone international  action);  (6)  issue  certificates  for 
bullion  at  the  rate  of  4 1 2 1  grains  to  the  dollar,  without 
limit  (which  was  equivalent  to  free  coinage  and  hence 
would  be  equally  disastrous). 

Windom  therefore  proposed  the  following  :  — 

Windom's  "  Issue  Treasury  notes  against  deposits  of  silver  bullion  at 

p  an'  the  market  price  of  silver  when  deposited,  payable  on  demand 

in  such  quantities  of  silver  bullion  as  will  equal  in  value,  at  the 
date  of  presentation,  the  number  of  dollars  expressed  on  the 
.  face  of  the  notes  at  the  market  price  of  silver,  or  in  gold,  at 

the  option  of  the  government ;  or  in  silver  dollars  at  the  option 
of  the  holder.  Repeal  the  compulsory  feature  of  the  present 
coinage  act." 

The  price  was  not  to  exceed  $1  for  41 2\  grains  of 
standard  metal. 


THE  SILVER   QUESTION  315 

In  support  of  the  measure  he  argued  that  while  satis-  Legal  tender 
fying  the  demand  for  the  continued  use  of  silver,  it  pro- 
vided a  note-issue  which  could  not  depreciate,  hence 
was  sound ;  would  enhance  the  value  of  silver  to  a  point  Appreciation 
where  free  coinage  would  be  safe ;  prevented  contrac-  pected. 
tion  by  supplying  the  place  of  bank-notes  rapidly  being 
retired,  yet  would  not  cause  inordinate  or  unhealthy  ex- 
pansion ;  would  if  successful  point  a  way  for  other 
nations  to  take.  Loss  to  the  government  by  reason  of 
depreciation  of  the  bullion  was  exceedingly  remote,  but 
even  if  it  came  to  pass,  the  government  having  assumed 
the  duty  of  providing  currency  must  stand  it.  Nor 
could  an  opportunity  be  given  for  speculation  in  silver, 
the  option  to  redeem  in  gold  being  a  sufficient  check. 
No  flood  of  silver  need  be  feared  to  cause  undue  infla- 
tion, because  being  taken  at  the  market  price  it  would 
not  pay  Europe  to  surrender  her  coins.  He  estimated 
the  surplus  product  of  silver  at  40,000,000  ounces,  and 
the  proposed  law,  if  limited,  would  at  the  maximum  take 
50,000,000  ounces ;  there  was  no  substantial  stock  on 
hand  anywhere.  He  preferred  that  there  be  no  limit 
on  the  amount.  If  any  limit  were  deemed  advisable  it 
should  be  by  excluding  foreign  silver  altogether. 

Assuming,  as  Windom  did  (for  he  was  impressed  by 
the  Western  view),  that  some  action  to  take  care  of  sil- 
ver was  requisite,  this  measure -was  perhaps  the  least 
objectionable. 

Harrison  in  his  message  declared  in  favor  of  some 
legislation  to  increase  the  use  of  silver  without  the 
danger  of  a  silver  basis.  He  had  not  had  opportunity 
to  study  the  Windom  plan,  but  approved  its  general 
lines. 

The  measure  was  introduced  in  January,  1890,  but  the  TheWin- 
tariff  bill  had  precedence.  Congress  debated  long,  and  congress" 
only  by  a  vote  of  120  to  117  was  ready  to  consider  it  in 


316  COTNEST  FOR  SOUND  MONEY 

June,  and  then  the  Committee  on  Coinage  reported  a 
much  altered  bill.  It  directed  the  purchase  monthly  of 
$4,500,000  worth  of  silver  with  an  issue  of  Treasury 
notes,  which  were  to  be  legal  tender,  with  free  coinage 
when  silver  reached  parity  (16  to  1).  Bland  moved  to 
recommit  the  bill  and  order  the  committee  to  report  a 
free  coinage  bill,  which  was  defeated  1 16  to  140. 
Materially  The  committee's  bill  passed  the  House  by  a  majority 

of  16,  no  Democrats  voting  in  its  favor.  In  the  Senate 
numerous  amendments  were  proposed.  One  striking 
out  the  legal  tender  feature  of  the  notes,  by  Morrill,  was 
defeated  14  to  50  (Carlisle  voting  for  it,  Sherman 
against).  One  to  strike  out  the  free  coinage  proviso 
was  lost  by  16  to  46.  Finding  themselves  strong 
enough,  the  silver  advocates  in  the  Senate  finally  substi- 
tuted a  free  coinage  bill  by  a  vote  of  42  to  25,  14  Repub- 
licans voting  aye  and  3  Democrats  nay.  After  a  severe 
contest  in  the  House  in  which  McKinley  led  the  almost 
solid  Republican  vote,  the  Senate  free  coinage  bill  was 
disagreed  to,  135  to  152,  and  the  bills  went  to  confer- 
ence, where,  largely  under  Sherman's  lead,  the  House 
bill  was  remodelled  into  the  shape  in  which  it  finally 
passed  on  July  14,  1890,  in  the  House  by  123  to  90 
(116  not  voting)  and  in  the  Senate  by  39  to  26;  both 
strict  party  votes,  for  it  was  a  purely  administration 
measure. 
The"Sher-  This  act,  sometimes  known  as  the  "Sherman  law," 
1890.  aW  provided  for  a  compulsory  purchase  by  means  of  an 
issue  of  legal  tender  Treasury  notes  of  4,500,000  ounces 
of  pure  silver  monthly,  at  the  market  price,  not  to  ex- 
ceed $1  for  371.25  grains  of  pure  silver  (equal  to 
$1.29.29  per  ounce).  Dollars  were  to  be  coined  for  one 
year,  and  thereafter  only  as  they  were  required  for  re- 
demption of  notes,  which  were  made  redeemable  in  gold 
or  silver  dollars  at  the  government's  option.     No  greater 


THE  SILVER   QUESTION  317 

or  less  amount  of  notes  was  to  be  outstanding  than  the 
cost  of  the  bullion  and  the  dollars  coined  therefrom  in 
the  Treasury,  and  silver  certificates  might  be  issued  on 
the  surplus  dollars  coined  (in  other  words  on  the 
"  seigniorage  ").  The  act  ateo  declared  it  the  purpose 
of  the  government  to  maintain  gold  and  silver  at  a 
parity ;  the  fund  of  lawful  money  held  for  redemption 
of  notes  of  liquidating  or  reducing  banks  was  "  covered 
into  the  Treasury  "  instead  of  being  held  as  a  trust  fund, 
the  notes  to  be  redeemed  to  be  treated  as  debt  of  the 
United  States. 

The  measure  as  passed  was  obviously  not  as  safe  or 
conservative  as  that  planned  by  Windom.  But  the 
friends  of  silver  demanded  a  larger  measure  of  "pro- 
tection "  for  the  white  metal  than  Windom  had  accorded 
it. 

Thus  "  something  was  done  for  silver."  The  tariff 
bill  was  also  passed,  reducing  revenues  $50,000,000 ; 
and  a  pension  bill  ultimately  calling  for  an  additional 
annual  expenditure  of  $50,000,000  also  became  law. 

The  prospect  therefore  was  that  the  surplus  would  be  Jhe  new 
annually  cut  down  $100,000,000,  and  that  the  inflation 
of  the  circulating  medium  would  be  at  the  rate  of  over 
$50,000,000  annually,  less  the  reduction  in  bank-notes. 
A  definite  increasing  liability  against  the  gold  reserve 
was  created  without  enlarging  the  reserve.  Careful  stu- 
dents of  the  situation  calculated  that  in  eighteen  months 
a  crash  would  come,  but  they  had  not  given  full  credit 
to  the  nation's  resources. 


3i8 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 

(Amounts  in  millions) 

Production  of  Gold  and  Silver 


World 

United  States 

Ratio 

Year 

Silver 

Silver 

Average 
Price  of 

Gold 

Commer- 
cial 
Value 

Coining 
Value 

Gold 

Commer- 
cial 
Value 

Coining 
Value 

Silver 

l879 

109 

84 

96 

39 

35 

41 

18.39 

#1.124 

1880 

106 

86 

97 

36 

35 

39 

18.05 

I.I45 

1881 

103 

90 

102 

35 

38 

43 

18.25 

1. 132 

1882 

I02 

98 

112 

33 

41 

47 

18.20 

1. 136 

1883 

95 

99 

"5 

30 

40 

46 

18.64 

1. 109 

1884 

102 

9i 

i°5 

3i 

42 

49 

18.61 

I. Ill 

1885 

108 

98 

118 

32 

43 

52 

19.41 

I.065 

1886 

106 

93 

121 

35 

39 

51 

20.78 

•995 

1887 

106 

94 

124 

33 

40 

53 

2I.IO 

•979 

1888 

110 

102 

141 

33 

43 

59 

22.00 

.940 

1889 

123 

112 

155 

33 

47 

65 

22.IO 

•935 

1890 

119 

132 

163 

33 

57 

70 

19-75 

1.046 

The  Purchase  and  Coinage  of  Silver 


Fiscal  Year 

M 
Z 

n 

H 

u 
z 

O 

H 

CO 

O 
O 

M 

u 

5  w 

txl  3 

So 

«  OS 

s  a 

>  "• 

< 

w 

s 

<  K  „ 
>  w  g 

gen  0 
gfcQ 

H 

b. 

O        « 

«   OS 

III    lx]    < 

0     M 
0 

UP  h 

K  <  O 

5  yo 
Sis 

j 

O  H 
Q  3 
wO 

M 

lx!  « 

>  5 

ga 

en 

Net  Silver 

Dollars  and 

Bullion  in 

Treasury 

1878  .... 

II 

13 

$  1.2048 

$-93*% 

22 

— 

I 

«s 

1879 

19 

22 

1.1218 

.8676 

28 

— 

8 

33 

1880 

22 

25 

1. 1440 

.8848 

27 

6 

19 

44 

1 881 

20 

22 

1. 1328 

.8761 

28 

39 

29 

27 

1882 

21 

24 

I-I351 

.8779 

28 

55 

32 

36 

1883 

23 

26 

1.1174 

.8642 

28 

73 

35 

44 

1884 

22 

24 

I.II20 

.8600 

28 

96 

40 

43 

1885 

22 

24 

I.0897 

.8428 

29 

102 

39 

6F 

1886 

23 

23 

I-0334 

.7992 

3i 

88 

53 

96 

1887 

26 

26 

.981O 

•7587 

34 

142 

56 

80 

1888 

25 

24 

•9547 

.7384 

32 

200 

56 

54 

1889 

26 

25 

•9338 

.7222 

35 

257 

54 

33 

1890 

28 

27 

.9668 

•7477 

38 

297 

56 

27 

THE  SILVER    QUESTION 
Exports  and  Imports  of  Specie 


319 


Gold 

Silver 

Fiscal  Year 

Exports 

Imports 

Excess 
—  Export 
+  Import 

Exports 

Imports 

Excess 
—  Export 
+  Import 

1879    .     . 

5 

6 

+      I 

20 

15 

-    5 

1880 

4 

81 

+  77 

13 

12 

—    1 

1881 

3 

100 

+  97 

17 

II 

-    6 

1882 

33 

34 

+    1 

17 

8 

-    9 

1883 

12 

18 

+    6 

20 

11 

-    9 

1884 

41 

23 

-  18 

26 

*5 

—  11 

1885 

8 

27 

+  19 

34 

17 

-  17 

1886 

43 

21 

—  22 

30 

18 

—  12 

1887 

10 

43 

+  33 

26 

17 

-    9 

1888 

18 

44 

+  26 

28 

15 

-  l3 

1889 

60 

10 

-  5° 

37 

19 

-  18 

1890 

«7 

13 

-    4 

35 

21 

-  14 

III.    THE    NATIONAL    BANKING 
SYSTEM 

CHAPTER  XIV 

1861  to  1875 

Bank  currency  in  the  United  States  in  1 861,  as  has 
been  shown,  was  issued  wholly  under  state  authority 
and  was  far  from  creditable  to  a  nation  boasting  ad- 
vanced civilization.  In  the  Eastern  states  and  a  few 
others  salutary  laws  had  led  to  systems  which  were 
sound,  but  in  the  greater  part  of  the  country,  owing  to 
lax  legislation  and  want  of  supervision,  bank-notes 
passed  at  varying  rates  of  discount  and  were  counter- 
feited to  an  extent  that  was  appalling. 
Conditions  The  conditions  precipitated  by  the   Civil  War  were 

therefore  favorable  to  the  creation  of  a  national  currency, 
uniform  in  character  and  based  upon  lines  of  conserva- 
tism and  safety.  The  basic  principles  underlying  the 
National  Bank  Act  and  bank  legislation  in  many  of  the 
states  were  evolved  by  Alexander  Hamilton  in  preparing 
the  charter  for  the  first  United  States  Bank.  The  laws 
of  several  states,  especially  those  of  New  York,  furnished 
the  provisions  of  the  National  Bank  Act. 

The  federal  government  was  in  pressing  need  of 
money.  Bonds  could  not  be  readily  sold  for  coin,  and 
Secretary  Chase  would  not  take  bank-notes,  even  had 
the  subtreasury  law  of  1846  not  forbidden  his  doing 
so.  A  paper  issue  was  indispensable,  and  Chase  recom- 
mended a  national  currency  system  based  upon  govern- 

320 


THE  NATIONAL  BANKING  SYSTEM  32 1 

merit  bonds.  The  bill  for  this  purpose,  drawn  upon  the  National  cur- 
lines  suggested  by  the  Secretary,  was  introduced  in 
Congress  by  Representative  Spaulding  (N.Y.)  in  the 
winter  of  1861-1862.  It  was  necessarily  a  lengthy 
measure,  and  the  exigencies  of  the  war  devolved  great 
labors  upon  Congress.  It  was  not  believed  that  the 
good  effects  hoped  for  under  this  bill  could  be  realized 
in  time  to  meet  the  government's  necessity,  hence  the 
measure  went  over  until  the  succeeding  session,  and  the 
result  was,  as  we  have  seen,  the  legal  tender  government 
note-issue.  Chase  was  persistent,  however,  urging  upon 
Congress  the  double  advantage  of  his  plan,  at  once 
making  a  market  for  the  bonds  and  furnishing  the 
people  with  a  safe  and  uniform  currency,  permanent  in 
character. 

The  legal  tender  issue,  owing  to  its  doubtful  constitu-  A  permanent 

,.  i'i  ,      ...         ■  ,  .  system  con- 

tionality  and  its  dangerous  facility  of  expansion,  was  tempiated. 
regarded  as  temporary,  and  no  one  contemplated  its 
retention  as  a  permanent  currency  system.  Lincoln,  in 
his  message,  strongly  urged  the  speedy  enactment  of 
the  proposed  law.1  The  act  passed  both  houses  of  Con- 
gress and  was  approved  February  25,  1863,  just  one  year 
after  the  approval  of  the  legal  tender  act.  A  considerable 
number  of  Republicans  and  practically  all  the  Democrats 
opposed  the  measure.  The  debate  showed  that  the 
intention  was  to  supplant  state  bank  circulation,  and 
this  intensified  the  opposition.  It  is  also  clear  that  the 
authors  of  the  measure  contemplated  that  the  currency 
created  would  ultimately  supplant  the  United  States 
notes.  Sherman,  in  debate,  alluding  to  the  latter  form  of 
notes,  said  that  they  could  "  be  used  only  during  the  war. 
The  very  moment  that  peace  comes,  all  this  circula- 
tion .  .  .  will  at  once  be  banished.  .  .  .  The  issue  of 
government  notes  can  only  be  a  temporary  measure." 

1  See  page  191. 


322 


CONTEST  FOR  SOUND  MONEY 


National 
Currency 
Act. 


Revision  of 
1864. 


Circulation. 


Spaulding  regarded  it  as  "  the  commencement  of  a  per- 
manent system  for  providing  a  national  currency." 

The  act  was  known  as  the  National  Currency  Act 
and  provided  for  a  bureau  in  the  Treasury  Department 
to  be  in  charge  of  a  Comptroller  of  the  Currency  under 
the  general  direction  of  the  Secretary,  to  report  directly 
to  Congress.  This  bureau  was  given  supervision  of  the 
banks  to  be  established  under  the  act  and  the  currency 
issued  by  them.  Hugh  McCulloch  was  appointed  the 
first  Comptroller.  He  did  not  favor  the  act  but  learned 
to  appreciate  its  usefulness. 

In  order  to  constrain  state  banks  to  nationalize,  their 
notes  were  by  the  act  of  March  30,  1863,  taxed  two  per 
cent,  just  double  the  tax  imposed  upon  national  currency. 
Four  hundred  banks  were  immediately  organized,  but 
defects  in  the  law  were  at  once  discovered,  and  upon  the 
recommendation  of  Treasury  officials  it  was  revised  by 
the  act  of  June  3,  1864.  The  act  passed  the  House 
by  a  vote  of  80  to  60,  no  Democrats  favoring  it  and  only 
two  Republicans  opposing  it,  in  the  Senate  by  30  to  9, 
no  Democrats  favoring  and  three  Republicans  opposing. 
Under  its  provisions  any  number  of  persons  not  less  than 
five  might  form  a  banking  association.  The  minimum 
capital  was  fixed  at  $50,000  for  places  under  6000 
population,  $100,000  for  places  not  exceeding  50,000, 
and  $200,000  for  larger  cities.  One-half  of  the  capital 
was  required  to  be  paid  in  cash  before  beginning 
business,  the  balance  in  10  per  cent  monthly  instal- 
ments. Shareholders  were  liable  for  debts  of  the  bank 
to  an  amount  equal  to  the  par  of  their  stock.  Each 
bank  was  required  to  deposit  with  the  Treasury,  United 
States  bonds  bearing  not  less  than  5  per  cent  interest 
to  the  amount  of  one-third  of  the  capital  (but  in  no  case 
less  than  $30,000),  to  be  held  to  secure  circulation, 
which  might  be  issued  to  the  extent   of   90  per   cent 


THE  NATIONAL  BANKING  SYSTEM  323 

of  the  market  value  of  the  bonds  (not  to  exceed  90 
per  cent  of  par),  but  not  in  excess  of  the  bank's  capital. 
Notes  might  be  in  denominations  from  $1  to  $1000  and 
were  to  bear  a  certificate  on  their  face  that  bonds  of  the 
United  States  were  held  by  the  Treasury  to  secure  them, 
the  name  of  the  bank,  and  signatures  of  its  officers. 
They  were  made  redeemable  on  demand  in  "lawful 
money "  (i.e.  legal  tender),  receivable  for  all  public 
dues  except  customs  and  for  all  payments  by  the  United 
States  except  interest  on  the  public  debt  and  redemption 
of  national  currency.  The  volume  of  notes  was  limited  Volume  of 
to  $300,000,000,  of  which  one-sixth  might  be  under  $5 
until  after  the  resumption  of  specie  payments,  when 
none  under  $5  were  to  be  issued.  Banks  might  reduce 
their  bond  deposits  to  the  minimum  required  by  sur- 
rendering their  notes  for  cancellation.  They  were  re- 
quired to  receive  each  other's  notes  at  par  and  not  to 
pay  out  notes  of  banks  failing  to  redeem  on  demand. 

Seventeen  reserve  cities  were  designated  by  the  act. 
The  banks  in  these  were  required  to  hold  a  25  per  cent 
reserve  on  circulation  and  deposits,  one-half  of  which 
might  be  to  their  credit  with  an  approved  reserve  agent 
in  the  city  of  New  York,  banks  in  the  latter  city  being 
required  to  keep  a  25  per  cent  cash  in  bank  reserve.  Reserves 
All  other  banks  were  required  to  keep  15  per  cent  requir 
reserve  on  circulation  and  deposits,  three-fifths  of  which 
might  be  to  their  credit  with  a  bank  approved  by  the 
Comptroller  of  the  Currency  in  any  of  the  reserve  cities. 
When  reserves  were  impaired  no  new  loans  were  to  be 
made  until  the  same  were  restored,  and  if  not  restored 
within  thirty  days  after  notice  from  the  Comptroller,  a 
receiver  might,  with  the  approval  of  the  Secretary  of 
the  Treasury,  be  appointed.  A  receiver  might  also  be 
appointed  for  failure  to  redeem  notes  or  provide  for 
their  redemption  at  the  reserve  agencies.     In  case  of 


324 


CONTEST  FOR  SOUND  MONEY 


General 
regulation. 


Public  de- 
positories. 


receivership  the  bonds  were  to  be  sold  by  the  Comp- 
troller, and  the  bank's  circulation  retired  with  the  pro- 
ceeds. If  there  were  a  deficit,  the  amount  thereof  was 
a  paramount  lien  upon  all  the  bank's  assets. 

The  banks  might  transact  a  general  banking  business. 
Loans  in  excess  of  10  per  cent  of  the  capital  to  any  one 
person  or  concern  were  forbidden,  bona  fide  discount  or 
purchase  of  bills  receivable  excepted.  Interest  rates 
were  regulated.  Banks  were  forbidden  to  acquire  real 
estate  other  than  for  their  necessary  use,  unless  the 
same  were  taken  for  preexisting  debts.  Before  divi- 
dends were  declared,  10  per  cent  of  the  profits  were 
required  to  be  passed  to  a  surplus  fund  until  it  should 
equal  20  per  cent  of  the  capital.  A  tax  of  \  per  cent 
semiannually  was  imposed  upon  circulation,  and  \  per 
cent  each  upon  capital  and  deposits,  in  lieu  of  all  other 
federal  taxes.  Charters  extended  for  a  period  of  twenty 
years  from  date  of  incorporation,  but  dissolution  might 
be  effected  by  a  two-thirds  vote  of  shareholders,  in  which 
case  notes  were  to  be  advertised  for  and  redeemed. 
After  one  year,  however,  the  bank  might  deposit  with 
the  Treasury  lawful  money  to  redeem  the  notes  and 
receive  back  the  bonds  held.  Periodical  examinations, 
full  and  verified  quarterly  reports,  and  monthly  reports 
of  the  principal  items,  were  required.  The  total  debts 
of  a  bank,  aside  from  its  notes  and  deposits,  were  not  to 
exceed  its  capital.  Provision  was  made  for  the  conver- 
sion of  state  banks  into  the  national  system.  National 
banks  might  be  designated  by  the  Secretary  of  the 
Treasury  as  government  depositories  for  all  revenues 
except  customs,  such  deposits  to  be  secured  to  the  satis- 
faction of  the  Secretary  "by  government  bonds  and 
otherwise."  Congress  reserved  the  right  at  any  time  to 
amend  or  repeal  the  act. 

The  original  act  (1863)  had  a  provision  under  which 


THE  NATIONAL  BANKING   SYSTEM  325 

state  banks  could  enjoy  the  privilege  of  depositing  bonds 
and  issuing  notes,  although  remaining  under  the  control 
of  the  states.  It  also  provided  for  an  apportionment  of 
circulation  among  the  states  according  to  population 
and  bank  facilities,  and  required  a  25  per  cent  reserve 
for  all  banks.  It  omitted  the  requirement  for  a  surplus 
fund,  for  redemption  of  notes  at  reserve  agencies,  and 
the  regulation  of  discount  rates. 

By  the  end  of  1864  there  were  638  banks,  with  a  cap- 
ital of  over  $135,000,000  and  circulation  of  nearly 
$67,000,000.  They  owned  at  that  time  $176,500,000 
government  bonds,  and  had  helped  to  place  with  the 
public  a  much  larger  amount.  The  government's  de- 
posits with  them  amounted  to  nearly  $38,000,000. 

The  state  banks  experienced  little  difficulty  in  redeem-  State  *»»**• 
ing  their  notes  in  greenbacks,  and  constantly  maintained 
a  very  large  volume  in  circulation.  Under  the  laws  of 
many  states  bank-notes  were  issued  against  the  credit 
or  general  assets  of  the  banks,  and  where  a  deposit  of 
security  was  required  it  was  easier  or  more  profitable  to 
comply  with  the  state  laws  than  to  deposit  United  States 
bonds  as  required  by  the  National  Bank  Act.  The 
amount  of  notes  which  might  be  issued  was  less  re- 
stricted under  the  state  laws  and  altogether  banking 
under  the  state  systems  was  more  profitable.  The  cur- 
rency had  not  been  nationalized,  and  the  national  system 
as  a  market  for  bonds  had  been  disappointing. 

Therefore,  on  March  3,  1865,  a  revenue  law  imposed  Tax  on  state 

,  ,        ,  .  ,  ,        bank-notes. 

a  tax  of  10  per  cent  upon  state  bank-notes  paid  out  by 
any  bank,  national  or  state,  and  also  provided  that  state 
banks  with  branches  might  come  into  the  national  sys- 
tem and  retain  their  branches.  In  1866  the  10  per  cent 
tax  was  extended  to  state  bank-notes  used  in  payment 
by  any  one.  This  legislation  very  soon  caused  the  dis- 
appearance of  all  such  notes  and  was  a  powerful  factor 


326  CONTEST  FOR  SOUND  MONEY 

in  inducing  banks  to  organize  under  the  national  system. 
At  the  end  of  1865  there  were  1582  national  banks  with 
over  $400,000,000  capital,  owning  $440,000,000  of  bonds, 
with  circulation  amounting  to  $213,000,000.  They  also 
had  outstanding  over  $45,000,000  of  old  notes  issued 
by  those  which  had  been  state  institutions. 

The  act  of  March  3,  1865,  regulated  the  proportion 
of  note-issues  of  largely  capitalized  banks,  diminishing 
the  ratio  as  the  capital  increased,  and  provided  that 
one-half  of  the  maximum  circulation  ($300,000,000)  was 
to  be  apportioned  among  the  states  according  to  popu- 
lation, the  other  half  "  with  due  regard  to  banking 
capital,  resources,  and  business."  This  law  was  the 
result  of  a  tendency,  anticipated  in  the  original  currency 
act,  towards  a  monopolization  of  the  new  bank  issues 
by  Eastern  banks.  The  Southern  states,  recently  re- 
stored to  the  Union,  had  now  to  be  provided  for.  The 
limit  of  circulation  was  soon  reached, 
state  bank-  Let  us  now  turn  to  the  state  banks  and  record  the 

conditions  at  the  period  of  the  disappearance  of  a  system 
which  had  existed  for  thirty  years,  despite  its  glaring 
defects  and  the  want  of  security,  uniformity,  and  sta- 
bility of  the  notes  issued  thereunder.  In  the  states 
which  formed  the  Southern  Confederacy  there  were  in 
1861  about  250  banks,  capitalized  at  $110,000,000,  with 
$68,000,000  of  note  circulation  and  $31,000,000  in  specie. 
With  some  notable  exceptions  these  were  the  worst  of 
the  note-issuing  banks  of  that  period.  The  Civil  War 
,  served  to  wipe  them  out  of  existence  so  far  as  their 
currency  functions  were  concerned.  The  system  of 
banks  in  the  remainder  of  the  country  at  this  time  was 
not  materially  different  as  to  currency  and  supervision 
from  that  existing  in  the  period  of  18 57-1 860  already 
described.  The  war  gave  a  wonderful  impetus  to  busi- 
ness.    The  repeated  issue  of  United  States  notes,  sus- 


THE  NATIONAL  BANKING  SYSTEM  327 

pension  of  specie  payments,  and  general  inflation  of 
values  gave  to  state  banks,  with  their  facility  for 
note  expansion,  a  great  opportunity  to  make  money. 
It  was  only  natural  that  they  should  resist  the  establish- 
ment of  a  national  currency  system. 

The  Treasury  reports  upon  the  condition  of  state  state  bank 
banks  were  not  continued  after  1863.  From  Secretary 
Chase's  reports  it  appears  that  in  1861  there  were  1601 
state  banks,  with  a  capital  of  $429,600,000;  in  1863, 
1466  banks,  with  a  capital  of  $405,000,000.  The  circu- 
lation, which  in  1861  was  $202,000,000  and  in  1862 
only  $184,000,000,  rose  to  nearly  $239,000,000  in  1863, 
an  increase  of  $55,000,000  coincident  with  the  issue  by 
the  government  of  $400,000,000  legal  tender  notes. 
This  was  the  largest  amount  of  state  bank-notes  ever 
reported.  In  the  year  when  the  new  system  was  born 
the  old  one  showed  the  maximum  note-issue,  as  if  to 
challenge  its  competitor.  With  the  power  of  the  federal 
government  behind  it,  however,  the  national  system  was 
rapidly  growing.  In  January,  1864,  state  bank  circula- 
tion was  estimated  at  $170,000,000,  and  on  July  1,  at 
$126,000,000.  The  power  of  Congress  to  tax  the  notes 
of  state  banks  out  of  existence  was  contested  and  carried 
to  the  Supreme  Court,  which  sustained  the  law  (Veazie 
Bank  vs.  Fenno,  8  Wall.  533). 

The  interest-bearing  legal  tender  notes  which  were  Three  per 
held  by  the  banks  in  their  reserves  matured  in  1867.  ^tes 
It  was  feared  that  their  retirement  and  consequent 
substitution  of  non-interest-bearing  United  States  notes 
would  occasion  a  contraction  of  the  currency  and  inter- 
fere with  business  prosperity.  Hence  the  act  of  March 
2,  1867,  authorized  the  issue  of  $50,000,000  of  3  per 
cent  temporary  loan  certificates  payable  on  demand,  and 
the  act  of  July  25,  1868,  permitted  the  use  of  $25,000,000 
more,  to  take  the  place  of  the  maturing  interest-bearing 


328 


CONTEST  FOR  SOUND  MONEY 


Opposition 
to  national 
banks. 


McCulloch's 
defence  of 
the  system. 


notes  in  bank  reserves.     The  maximum  issue  was  about 
$60,000,000. 

The  national  currency  was  absolutely  secured  by 
government  bonds  and  passed  at  par  throughout  the 
length  and  breadth  of  the  land.  It  presented  a  strong 
contrast  to  the  old  system  of  state  bank  circulation, 
consisting  of  more  or  less  doubtful  promises  to  pay  and 
costing  the  public  through  discount  and  losses  at  its 
best  about  5  per  cent  per  annum.  But  the  national  bank 
circulation  was  limited  to  $300,000,000,  and  notwith- 
standing the  apportionment  act  of  1865  the  larger  por- 
tion had  been  obtained  by  the  Eastern  states.  This  gave 
rise  to  the  cry  of  monopoly.  The  advocates  of  more 
money  and  cheap  money  obtained  a  ready  audience, 
producing  a  practical  recurrence  of  the  events  of  1832. 
There  arose  a  substantial  party  in  1867  which  favored 
the  substitution  of  legal  tender  notes  for  bank-notes, 
and  in  fact  the  national  system  suffered  a  precarious 
existence  for  the  next  ten  years,  with  strong  probabilities 
of  its  abolition.  Secretary  McCulloch  felt  constrained 
to  defend  the  system  from  the  attacks  of  the  anti-bank 
element,  which  had  the  aid  of  the  friends  of  the  old 
state  banks.  The  following  summary  of  his  arguments 
is  interesting.  The  national  system  had  been  adopted 
not  to  do  away  with  state  banks  but  to  supersede  a  very 
defective  bank  currency  with  a  national  one.  The  legal 
tender  notes  were  only  temporary  currency,  the  national 
bank-notes  were  proposed  as  a  permanent  currency. 
The  legal  tenders  were  subject  to  inflation,  depreciation, 
and  other  evils  ;  the  national  bank-notes  could  easily 
be  regulated  and  kept  from  depreciating ;  moreover,  to 
supersede  them  now  would  inevitably  cause  a  crisis. 
On  the  other  hand,  the  Nation  was  bound  in  honor  to 
retire  the  greenbacks,  and  the  policy  of  contraction  of 
these  notes  was  the  only  proper  one  in  view  of  the 


THE  NATIONAL  BANKING  SYSTEM  329 

redundancy  of  paper  money  and  the  imperative  duty  of 
resuming  coin  payments  at  an  early  date.  An  increase 
of  greenbacks,  such  as  was  contemplated  by  the  anti- 
bank  men,  would  render  resumption  much  more  difficult 
and  cause  irretrievable  losses.  In  order  to  provide  the 
sections  inadequately  supplied  with  circulation,  he  rec- 
ommended a  redistribution  by  law.  He  regarded  it 
unwise  to  increase  the  volume  of  notes  until  after  the 
resumption  of  coin  payments.  The  circulation^  per 
capita  at  this  time  was  $18.28,  against  $13.35  f°r  i860 
and  $23.80  for  1865. 

It  is  interesting  to  note  the  earnestness  with  which   interest  on 

reserve 

Comptroller  Hulburd  in  1867,  1868,  and  1869  denounced  deposits, 
the  payments  of  interest  on  deposits  by  New  York  banks 
as  an  element  of  danger.  He  argued  that  interest  at- 
tracted large  deposits  of  money  from  the  interior  when 
not  needed  for  local  purposes,  which  money  to  be  avail- 
able must  necessarily  be  loaned  to  brokers  on  call ;  the 
latter  were  able  to  lock  up  money  and  raise  rates  of 
interest  by  means  of  over-certification,  resulting  in  a 
money  stringency  and  general  disturbance  when  these 
loans  were  necessarily  called  in  order  to  admit  of  sending 
the  money  back  to  the  interior  to  again  serve  the  local  de- 
mand. Why  brokers  as  a  class  should  be  subjected  to  the 
charge  of  a  desire  to  raise  money  rates  does  not  appear. 

Secretary  Boutwell  in  1869  strongly  indorsed  Comp-  Boutweii  on 
troller  Hulburd's  recommendations  and  favored  a  law  of  checks, 
absolutely  prohibiting  the  payment  of  interest  on  de- 
posits and  limiting  collateral  loans  to  10  per  cent  of  a 
bank's  capital.  He  was  also  satisfied  that  the  practice 
of  certifying  checks,  even  when  funds  were  in  bank  to 
the  credit  of  the  drawer,  was  fraught  with  evil  and 
should  be  entirely  prohibited.  It  is  indeed  strange  that 
so  absurd  a  proposition  could  emanate  from  the  chief 
financial  officer  of  the  government. 


330 


CONTEST  FOR  SOUND  MONEY 


Redistribu- 
tion of  circu- 
lation. 


Increase  by 
act  of  1870. 


On  February  19,  1869,  an  act  was  passed  prohibiting 
making  loans  either  upon  legal  tender  notes  or  national 
bank-notes  as  collateral.  This  was  designed  to  prevent 
contraction.  On  March  3,  1869,  a  law  authorized  the 
Comptroller  to  fix  the  dates  of  reports  at  his  discretion, 
not  less  than  five  each  year,  and  required  reports  of 
earnings  and  dividends  semiannually ;  another  prohibited 
certification  of  checks  in  excess  of  the  drawer's  balance. 

The  absolute  inelasticity  of  the  bank  circulation  became 
an  important  question.  The  authorized  $300,000,000  had 
been  absorbed,  and  no  new  banks  could  be  organized  ex- 
cept as  old  ones  went  out  of  business.  Only  fifteen 
banks  had  failed,  and  only  fifty-six  had  gone  into  volun- 
tary liquidation  up  to  the  close  of  1869.  Moreover,  the 
government  was  about  to  retire  the  3  per  cent  reserve 
certificates,  which  would  cause  a  greater  demand  for 
United  States  notes  for  reserve  purposes,  thereby  con- 
tracting the  currency.  In  February,  1870,  the  House 
of  Representatives,  by  a  vote  (no  to  73)  which  was 
practically  sectional  rather  than  partisan,  passed  a  reso- 
lution declaring  that  the  country  required  more  money 
and  directed  the  Banking  and  Currency  Committee  to 
prepare  a  bill  for  an  increase  of  $50,000,000.  After 
great  labor  Congress,  on  July  12,  1870,  passed  an  act  to 
increase  the  circulation  of  national  banks  $54,000,000. 
This  was  to  take  the  place  of  the  3  per  cent  reserve 
certificates  about  to  be  retired.  The  act  also  provided 
for  a  reapportionment  of  the  circulation  by  taking  from 
banks  in  states  having  more  than  their  share,  according 
to  wealth  and  population,  and  assigning  it  to  banks  in 
states  having  less.  The  proportion  in  the  Eastern  and 
Middle  states  was  then  some  $80,000,000  in  excess, 
the  South  being  entitled  to  $57,200,000  more  than  it 
had.  The  act  also  limited  the  amount  of  circulation 
of  banks  thereafter  organized  to  $500,000  and  authorized 


THE  NATIONAL  BANKING  SYSTEM  331 

national  gold  banks.  This  latter  provision  was  practically- 
confined  to  the  Pacific  slope,  where  specie  payments  had 
not  been  suspended.  The  issues  of  these  banks  were 
limited  to  80  per  cent  of  the  par  value  of  bonds  de- 
posited, were  redeemable  in  gold  on  demand,  and  gold 
reserves  of  25  per  cent  were  to  be  maintained;  the 
banks  were  not  required  to  take  the  notes  of  other 
banks  nor  to  provide  for  redemption  in  the  East. 

During  the  discussion  of  this  measure  propositions 
were  introduced,  but  defeated,  to  repeal  the  10  per  cent 
tax  on  state  bank-notes,  to  fix  maximum  discount  rates 
at  7  per  cent,  to  prohibit  the  payment  of  interest  on 
deposits,  to  pay  no  interest  on  bonds  while  on  deposit  to 
secure  circulation,  and  to  substitute  United  States  notes 
for  bank-notes. 

On  June  18,   1872,  the  Treasury  was   authorized  to  Currency 

certificates 

receive  on  deposit  legal  tender  notes  (greenbacks)  and 
issue  therefor  non-interest-bearing  currency  certificates 
in  denominations  of  $5000  and  $10,000.  These  certifi- 
cates were  a  convenient  form  of  bank  reserve,  and  were 
especially  useful  in  the  settlement  of  large  clearing- 
house balances. 

Statesmen  and  economists  were  much  in  need  of  some 
central  reservoir  of  information  in  regard  to  all  banks 
and  banking  institutions,  state  as  well  as  national.  To 
provide  accurate  statistical  information  of  such  character 
the  act  of  February  19,  1873,  provided  that  the  Comp- 
troller should  report  the  condition  of  state  banks  and 
other  financial  institutions  and  private  bankers  annually. 
In  order  to  comply  with  this  requirement  the  Comptrol- 
ler corresponds  with  the  supervisory  departments  of  the 
different  states,  as  well  as  with  the  various  institutions 
directly,  and  submits  the  most  accurate  data  obtainable. 

In  September,  1873,  there  occurred  a  monetary  panic  Crisis  of 
in  New  York,  causing  a  suspension  of  cash  payments 


332  CONTEST  FOR  SOUND  MONEY 

for  forty  days  and  carrying  down  many  business  houses. 
The  unfortunate  experience  of  this  trying  period  greatly 
emphasized  the  defects  in  the  currency  system.  The 
Treasury  aided  in  relieving  the  stringency  by  bond  pur- 
chases and  by  the  very  questionable  course  of  issuing 
greenbacks  "in  reserve,"  that  is,  greenbacks  that  had 
once  been  redeemed  and  retired. 

The  New  York  banks  presently  lost  $35,000,000  of 
cash  and  for  relief  were  compelled  to  resort  to  clearing- 
house loan  certificates,  issued  upon  securities  hypothe- 
cated, and  used  in  settlement  of  debit  balances  at  the 
clearing-house.  The  maximum  amount  of  this  auxiliary 
currency  used  was  $26,565,000. 

Grant  on  President  Grant,  in  his  message  in  December,  sug- 

gested that  the  crisis  may  have  been  a  blessing  in  dis- 
guise, and  cautioned  Congress  to  heed  the  lesson  and 
provide  against  its  recurrence.  Elasticity  of  the  cur- 
rency and  the  prevention  of  speculative  use  of  reserves, 
the  prohibition  of  interest  on  deposits,  the  requirement 
of  reserves  to  be  kept  at  home,  the  redemption  of  notes 
by  banks,  and  "  free  banking  "  {i.e.  removing  the  limit 
on  circulation  and  facilitating  its  retirement)  were  among 
the  remedies  he  suggested.  The  interconvertible  bond 
plan,  under  which  banks  could  obtain  government  notes 
at  any  time  by  depositing  bonds,  returnable  when  the 
notes  were  returned  and  bearing  no  interest  while  on 
deposit,  was  also  recommended. 

The  inflation  Congress,  regarding  the  proper  remedy  an  increase  of 
paper  money,  immediately  took  up  the  question,  and, 
after  the  consideration  of  numerous  propositions,  finally 
passed  an  act  increasing  national  bank-notes  and  legal 
tender  notes  to  $400,000,000  each,  prohibiting  interest 
payments  on  balances  held  as  reserve  on  circulation, 
requiring  accumulations  of  coin  by  banks  for  redemp- 
tion of  notes,  and  requiring  three-fourths  of  the  reserves 


THE  NATIONAL   BANKING  SYSTEM  333 

to  be  kept  in  cash  in  bank.  Grant,  after  much  urging, 
vetoed  the  measure,  calling  attention  to  the  fact  that 
$25,000,000  of  bank  currency  was  still  subject  to  reap- 
portionment to  states  having  a  deficiency.  When  that 
was  taken  up  and  specie  payments  restored,  it  would  be 
time  to  consider  the  demand  for  "more  money." 

Congress  thereupon  passed  the  act  of  June  20,  1874,  Act  of  1874. 
providing  that  in  lieu  of  the  required  reserve  (25  and 
15  per  cent  respectively)  for  redemption  of  circulation, 
lawful  money  to  the  extent  of  5  per  cent  of  the  circula- 
tion should  be  deposited  and  maintained  in  the  Treasury, 
and  the  current  redemption  of  notes  was  thereafter  to  be 
made  at  the  Treasury  and  by  the  Treasurer  instead  of 
by  reserve  agents.     The   5   per  cent  fund  was  to  be 
counted  as  part  of  the  reserve  on  deposits.     This  obvi- 
ously released  from  reserve  requirements  a  considerable 
amount  of  lawful  money,  estimated  by  Comptroller  Knox 
in  1874  at  over  $20,000,000.     The  act  also  provided  that  Provision  for 
banks  might  deposit  lawful  money  in  the  Treasury  for  notes. 
the  reduction  or  retirement  of  their  circulation  and  re- 
ceive back  their  bonds  pro  rata.     The  notes  were  then 
to  be  redeemed  out  of  this  fund  by  the  Treasury.     The 
bonds  on  deposit  were  not  to  be  reduced  below  the  mini- 
mum requirement.     Under  this  provision  currency  re- 
apportionment was  facilitated  as  banks  were  by  the  act 
compelled  to  surrender  excess  circulation.     The  amount 
now  to  be  redistributed  was  $80,000,000.     The  maximum 
circulation  issuable  remained  at  $354,000,000.     A  "free  Volume  of 
banking"  provision  was  presented  as  an  amendment  to  increased, 
the  bill  but  defeated,  as  were  also  amendments  to  replace 
bank-notes  with  greenbacks,  regulate  discount  rates,  and   • 
require  all  reserves  to  be  kept  in  cash  in  bank.     The 
latter  proviso  at  one  stage  had  passed  both  houses  of 
Congress  but  was  finally  lost.     The  measure  passed  by 
very  large  majorities. 


334  CONTEST  FOR  SOUND  MONEY 

It  appears  that  all  the  Comptrollers  of  the  Currency 
down  to  and  including  Knox  recommended  the  pro- 
hibition of  interest  upon  deposits  by  reserve  banks,  and 
stringent  measures  against  over-certification  of  checks, 
believing  that  the  payment  of  interest  abnormally  in- 
creased the  deposits  of  interior  banks  in  New  York 
City,  while  the  certification  of  checks  facilitated  the  use 
of  the  same  by  stock  exchange  brokers.  This  money 
being  in  use  by  the  brokers  when  required  for  crop- 
moving  purposes  was  what  occasioned  the  annual  strin- 
gency in  money  in  the  fall  of  the  year.  Secretary 
Bristow  disapproved  the  prohibition  of  interest  upon  de- 
posits, as  a  discrimination  against  national  and  in  favor  of 
state  banks,  but  suggested  a  tax  upon  all  interest-bearing 
deposits  as  a  means  of  discouraging  the  practice. 

The  strong  position  against  the  payment  of  interest 
on  deposits  by  banks,  taken  by  the  various  Comptrollers 
of  the  Currency  and  Secretaries  of  the  Treasury  down  to 
1874,  possesses  peculiar  interest  in  view  of  the  fact  that 
Secretary  Gage  in  1901  and  Secretary  Shaw  in  1902  recom- 
mended that  surplus  funds  of  the  Treasury  be  deposited 
with  banks  and  the  government  receive  interest  thereon. 

The  political  revolution  in  1874,  by  which  the  Repub- 
licans for  the  first  time  since  1859  l°st  control  of  the 
House  of  Representatives,  although  primarily  due  to 
the  conditions  after  the  panic,  was  also  largely  caused 
by  the  want  of  public  confidence  in  the  dominant  party. 
The  halting,  hesitating,  shuffling,  and  changing  positions 
which  it  occupied  with  reference  to  the  retirement  of 
the  greenbacks,  the  resumption  of  specie  payments,  and 
the  question  of  sound  money  generally,  had,  not  to  use 
a  stronger  term,  sorely  disappointed  the  public,  and  it 
was  generally  felt  that  a  change  might  prove  beneficial. 
This  feeling  was  certainly  justified  by  events.  Stung 
by  defeat  and  brought  face  to  face  with  the  political 


THE  NATIONAL  BANKING  SYSTEM  335 

consequences  of  their  insincere  and  opportunist  method 
of  meeting  these  questions,  they  strove  to  regain  lost 
ground  and  win  back  the  confidence  and  support  of  the 
business  interests  of  the  country.  In  the  short  session 
of  the  old  Congress  (1874-1875)  the  Republicans  under 
the  lead  of  Sherman  vigorously  pushed  a  specie  resump- 
tion measure,  coupled  with  free  banking,  which  finally  Free  banking 

.  1T  _  T  iii,   1..  and  resump- 

became  law  January  14,  1875.     It  repealed  all  limits  on  tioniaw. 
the  volume  of  national  bank-notes,  thus  doing  away  with 
the  necessity  for  redistribution.    It  was  passed  by  a  strict 
party  vote,  with  a  small  body  of  extreme  sound  money 
Republicans  opposing  the  measure. 

The  passage  of  the  resumption  act  marks  a  period  in  status  of 
the  life  of  national  banks.  At  this  time  there  were 
2027  of  these  associations,  with  capital  of  $496,000,000, 
circulation  $331,000,000,  individual  deposits  $683,000- 
000,  loans  $956,000,000,  government  bonds  $413,000,000, 
specie  $22,000,000,  legal  tenders  $116,000,000,  and  5 
per  cent  fund  with  the  Treasury  $21,000,000.  One 
hundred  and  seventy-eight  banks  had  gone  out  of  busi- 
ness in  the  eleven  years.  Thirty-seven  of  these  failed, 
twelve  of  them  ultimately  paid  their  debts  in  full,  and 
the  balance  generally  a  very  large  percentage  of  their 
indebtedness.     All  their  notes  were  paid  in  full. 

The  earnings  of  the  national  banks  calculated  upon 
capital  and  surplus  had  diminished  from  an  average  of 
1 1.8  per  cent  in  1870,  the  first  year  this  information  was 
reported,  to  10.3  per  cent  in  1874.  Dividends  averaged 
in  1870  10.05  per  cent,  and  in  1874  9.9  per  cent.  A 
generally  higher  ratio  of  earnings  prevailed  in  the  West 
and  South. 

The  incomplete  reports  of  state  banks  covered  only 
551,  with  capital  of  $69,000,000,  deposits  $166,000,000, 
loans  $176,000,000,  cash  $28,000,000.  Many  of  the 
states  still  neglected  to  require  reports  from  banks. 


336 


CONTEST  FOR  SOUND  MONEY 


STATISTICAL   RESUME 

(Amounts  in  millions  of  dollars) 

Condition  of  National  Banks,  1864  to  1875 

(at  dates  nearest  January  i) 


Year 

Number 

Capital 

Deposits 

Circula- 
tion 

Cash 

Loans 

1864  .  . 

139 

15 

19 



5 

II 

1865 

638 

J36 

221 

67 

77 

166 

1866 

1582 

403 

552 

213 

207 

50I 

1867 

1648 

420 

588 

291 

207 

609 

1868 

1682 

420 

562 

294 

»7S 

617 

1869 

1628 

419 

585 

294 

118 

645 

1870 

1615 

426 

555 

293 

136 

689 

1871 

1648 

435 

5i7 

296 

107 

726 

1872 

1790 

460 

617 

318 

124 

819 

1873 

1940 

483 

611 

336 

134 

886 

1874 

1976 

490 

553 

341 

160 

857 

1875 

2027 

496 

694 

33i 

139 

956 

Condition  of  State  Banks,  1861  to  1875,  so  far  as  obtainable 


State  Banks 

Savings  Banks 

Clear- 

Year 

Number 

Capi- 
tal 

De- 
posits 

Circu- 
lation 

Cash 

Loans 

Deposi- 
tors 
(ooo's) 

Depos- 
its (mil- 
lions) 

Average 
deposit 

New 
York 

l86l 
1862 
1863 
1864 
1865 
1866 
1867 
1868 
1869 
1870 
1871 
1872 

1873 
1874 
1875 

1601 

1496 

I466 

1089 

349 

297 

272 

247 

259 

325 

45  2 

566 

55i 

43° 
420 

405 
312 

71 

66 

65 
66 
67 

87 
in 
122 

43 
59 
69 

257 
297 

394 

in 

138 
166 

202 
184 
239 
163 

88 
102 

IOI 

5i 

11 

27 
28 

697 
648 
649 

119 

»54 

176 

694 
788 
887 
976 
981 

1067 

1 188 
1310 
1467 
1631 

1902 

1993 
2186 
2293 
2360 

147 
169 
206 
236 

243 
282 

337 
393 
458 
55° 
651 
735 
802 
865 
924 

$211 

215 
232 
242 

247 
265 
284 
3OO 
312 

337 
342 
369 
367 
377 
392 

5.916 
6,871 
14,868 
24,097 
26,032 
28,717 
28,675 
28,484 

37.407 
27,804 
29,301 
33.844 
35.461 
22,856 
25,061 

CHAPTER   XV 

1876   TO    1882 

The  changes  in  the  National  Bank  Act  in  1875  Continued 
broadened  the  scope  and  increased  the  power  of  national 
banks  with  respect  to  currency  by  removing  all  limitation 
upon  the  volume,  thereby  making  banking  free.  This 
made  it  possible  to  organize  banks  ad  libitum  in  the 
South  and  West,  and  tended  to  relieve  in  a  measure  the 
disadvantages  which  caused  so  much  just  complaint 
from  those  sections  owing  to  the  inadequacy  of  currency 
and  credit  facilities.  Rich  in  natural,  undeveloped  re- 
sources, these  sections  needed  capital  for  their  develop- 
ment. What  they  thought  they  needed  was  currency, 
and  believing  United  States  notes  most  likely  to  meet 
their  wants,  the  agitation  against  national  banks  and  in 
favor  of  the  substitution  of  greenbacks  for  bank-notes 
continued.  Although  bank  organization  and  the  issue 
of  bank  currency  was  now  absolutely  free,  the  cry  of 
monopoly  was  still  maintained. 

Comptroller  Knox  in  elaborate  reports  in  1875  and  Knox's 
1876,  in  which  the  history  of  banking  and  bank 
currency  in  the  United  States  from  the  beginning  of 
the  government  was  reviewed,  demonstrated  that  the 
national  system  was  so  vastly  superior  to  any  that  had 
preceded  it  that  to  abrogate  it  now  and  return  to  the 
former  conditions  would  mean  abandonment  of  a  safe 
and  sound  currency,  a  superior  banking  system,  and  the 
substitution  of  the  old  state  bank  systems  with  all  their 
evils.  The  cost  of  domestic  exchange  which  in  1859 
z  337 


338  CONTEST  FOR  SOUND  MONEY 

averaged    i    per   cent   had,    largely    by    the    national 
system,  been  reduced  to  a  small  fraction  of  that  rate. 

Against  the  charge  that  the  national  banks  made 
enormous  profits,  he  showed  that,  taxation  considered, 
the  earnings  were  actually  less  than  those  of  banks  out- 
side the  system  not  subjected  to  the  onerous  restrictions 
of  the  federal  law.  The  voluntary  surrender  of  over 
$50,000,000  of  notes  by  the  banks  he  contended  was 
proof  absolute  that  the  profit  on  circulation  could  not  be 
as  large  as  alleged. 

Efforts  to  repeal  the  10  per  cent  tax  on  state  bank 
issues  were  defeated  by  decisive  majorities. 
Receivership.  Congress  made  several  amendments  to  the  bank  act 
with  reference  to  settling  affairs  of  insolvent  banks. 
The  duties  of  the  Comptroller  of  the  Currency  in  this 
respect  are  most  important.  Under  the  law  the 
Comptroller  appoints  receivers  for  failed  national  banks, 
fixes  their  compensation,  adjusts  differences,  andapproves 
compromises  in  reducing  the  assets  of  failed  banks  to 
cash.  By  means  of  bank  examiners  he  is  fully  ad- 
vised as  to  conditions.  By  means  of  hard  and  pains- 
taking work  he  is  able  to  exercise  an  intelligent  judg- 
ment and  reach  a  satisfactory  conclusion  as  to  the  value 
and  adjustment  of  claims,  thereby  effecting  compromises, 
speedy  settlement  and  payment,  avoiding  expensive 
litigation  and  delay,  realizing  a  much  larger  net  amount 
for  the  payment  of  creditors,  and  securing  to  them  their 
dividends  in  a  much  shorter  space  of  time.  The 
Comptroller  sustains  the  same  relation  to  a  failed 
national  bank  and  the  receiver,  that  the  court  in  any  of 
our  states  does  to  a  failed  corporation  and  the  receiver 
of  the  same.  His  powers  are  parallel  and  coincident. 
The  cheapness  and  celerity  and  high  percentage  of 
dividends  realized  in  the  settlement  of  failed  national 
banks   compared  with  the  administration  of  corporate 


THE  NATIONAL  BANKING  SYSTEM  339 

receiverships  in  our  different  states  is  most  gratifying 
and  highly  complimentary  to  the  national  system  as 
administered  by  the  Comptroller  of  the  Currency. 

A  very  important  feature  of  the  national  banking  Bank  exami- 
system  is  the  supervision  exercised  by  official  examiners.  natlons- 
The  statute  provides  that  the  Comptroller,  with  the 
approval  of  the  Secretary  of  the  Treasury,  shall  "  appoint 
a  suitable  person  or  persons  to  make  an  examination  of 
the  affairs  of  every  banking  association,  who  shall  have 
power  to  make  a  thorough  examination  into  all  the 
affairs  of  the  association,  and,  in  doing  so,  to  examine 
any  of  the  officers  and  agents  thereof  on  oath ;  and  shall 
make  a  full  and  detailed  report  of  the  condition  of  the 
association  to  the  Comptroller."  The  above  provision 
is  wisely  made  very  general  in  its  terms.  There  is 
practically  no  limit  to  the  power  of  the  examiner  so  long 
as  he  is  right.  The  good  the  examiners  do  is  largely  of  a 
negative  character,  in  preventing  wrongs  and  misman- 
agement which  otherwise  might  exist.  Such  work 
necessarily  does  not  come  to  the  public  notice,  and  the 
system  therefore  does  not  receive  the  credit  it  is  entitled 
to.  They  do  not  always  detect  bad  management  and 
prevent  bank  failures,  but  their  restraining  and  corrective 
influence  is  of  the  greatest  value. 

Requiring  banks  to  make  and  publish  five  verified  re-  Value  of 
ports  of  condition  annually  upon  blanks  furnished  and  reports- 
in  a  form  prescribed  by  the  Comptroller  of  the  Cur- 
rency, necessarily  compels  the  banks'  bookkeeping  to 
conform  to  such  requirements.  It  compels  system  and 
method  in  the  conduct  of  each  bank's  affairs,  and  in- 
sures uniformity  throughout  the  nation.  This  provision 
is  most  wholesome  and  far-reaching  in  its  effect  upon 
the  conduct  of  the  bank's  business.  The  data  thus  ob- 
tained and  collected  afford  most  valuable  information 
as  to  business  and  economic  conditions.     Being  subject 


340  CONTEST  FOR  SOUND  MONEY 

to  the  verification  of  the  examiner,  they  are  accurate 
and  reliable. 

Circulation  Notwithstanding  free  banking,  the  banks  did  not  avail 
of  the  opportunity  to  increase  their  circulation  as  had 
been  expected,  proving  that  the  demand  for  "  more 
money  "  on  the  part  of  the  South  and  West  simply  ex- 
pressed the  need  of  more  capital.  Eighteen  million 
dollars  of  new  circulation  had  been  issued  under  the 
law  of  1875,  and  hence  nearly  $14,500,000  of  greenbacks 
had  been  retired.  The  privilege  of  reducing  circulation 
by  deposit  of  "  lawful  money  "  was  made  use  of  to  such 
an  extent  that  there  was  a  net  contraction  of  national 
bank  circulation  of  nearly  $40,000,000  since  the  act 
became  operative.  Thus  the  contraction  of  paper  cur- 
rency was  fully  $54,000,000.  On  the  other  hand,  the 
operation  of  the  changed  law  with  respect  to  reserve 
against  circulation  released  $14,000,000  of  legal  tenders, 
resulting  in  a  net  contraction  of  $40,000,000.  The 
ability  to  retire  circulation  by  depositing  lawful  money 
and  the  right  to  increase  at  any  time,  gave  to  the  cur-* 
rency  a  measurable  degree  of  flexibility. 

During  the  two  years  following  the  enactment  of  the 
law  of  1874  fully  two-thirds  of  the  national  bank-notes 
outstanding  were  redeemed  through  the  5  per  cent 
fund  and  new  ones  issued,  thus  furnishing  the  public  a 
cleanly  and  wholesome  currency. 

Greenbacker        jn   1878  a  determined  effort  was  made   to  supplant 

opposition  to  .  .  •  \ 

banks.  national  bank  currency  with  legal  tender  notes.     The 

Greenback  party  favored  this  movement.  Representa- 
tive Ewing  (Dem.,  O.),  one  of  the  chief  leaders  of  the 
movement,  introduced  an  elaborate  bill  for  the  purpose  in 
the  House.  The  measure  was  defeated  by  the  very  close 
vote  of  1 10  to  1 14,  a  dozen  Democrats  voting  against  the 
measure  and  as  many  Republicans  for  it.  This  vote  greatly 
encouraged  the  "  Greenbackers  "  to  continue  their  efforts. 


THE  NATIONAL   BANKING   SYSTEM  341 

In  February,  1878,  Congress  passed  the  silver  pur- 
chase and  coinage  law,  under  which  a  new  form  of  paper 
currency  (silver  certificates)  was  provided,  and  in  May, 
1878,  another  act,  under  which  the  further  retirement 
of  greenbacks  was  prohibited.  Both  these  measures 
were  intended  to  operate  against  the  extension  of  bank- 
note issues.  Bank  circulation  had  increased  during  the 
year  but  slightly,  and  mainly  owing  to  the  organization 
of  new  banks. 

The  national  bank  system  received  but  indifferent 
support  from  Secretary  Sherman,  who  expressed  him- 
self in  favor  of  the  continuance  of  the  bank  currency  at 
least  until  1883,  when  the  first  of  the  charters  were  to 
expire.  The  subject  could  then  be  discussed,  with  the 
public  mind  better  prepared  to  consider  it.  He  also  op- 
posed the  retirement  of  the  greenbacks. 

Notwithstanding  the  continuing  warfare  made  upon  Banks  aid 

1  1       1        1  ii  11  -ii  resumption. 

them,  the  banks  worked  zealously  to  aid  the  government 
in  meeting  the  requirements  of  the  resumption  law,  and 
very  materially  strengthened  their  gold  reserves  to  bring 
their  notes  to  par  in  specie. 

In  1879,  specie  payments  having  been  resumed,  busi- 
ness materially  revived.  The  circulation  of  banks 
showed  a  substantial  increase,  although  the  capital  had 
diminished.  The  issue  of  the  4  per  cent  bonds  at  or 
near  par  helped  to  make  circulation  profitable  ;  on  the 
other  hand,  the  increased  demand  for  circulating  media 
was  now  in  considerable  measure  supplied  by  gold  and 
by  silver  dollars  and  certificates  representing  the  same. 

Comptroller  Knox  reported  (1880)  that  the  banks  interest 
held  $100,000,000  in  specie,  and  as  evidence  of  an  im- 
proved condition  generally,  presented  a  table  showing  a 
material  lessening  of  prevailing  rates  of  interest  in  dif- 
ferent localities.  New  York  and  Philadelphia  rates 
were  from  3  to  5  per  cent,  Boston  and  Baltimore,  5  per 


342 


CONTEST  FOR  SOUND  MONEY 


Refunding 
vetoed. 


Checks  used 
as  money. 


cent,  Chicago,  4  to  7  per  cent,  St.  Louis,  5  to  7  per  cent, 
Cleveland  and  Milwaukee,  6  to  8  per  cent,  St.  Paul,  7  to 
10  per  cent,  Omaha,  10  per  cent,  Denver,  10  to  15  per 
cent,  and  California,  8  to  12  percent,  in  the  South,  7  to 
10  per  cent,  except  in  New  Orleans,  where  4  to  6  per 
cent  prevailed.  The  increase  of  circulating  media  since 
resumption  had  been  $248,000,000,  of  which  $176,000,000 
was  gold,  $5  1,000,000  silver,  and  $20,000,000  bank-notes. 
Attention  was  also  directed  to  the  average  size  of  loans 
and  discounts  by  banks  —  $1082  for  all.  The  Southern 
and  Western  states  averaged  $750,  whereas  the  average 
of  the  Bank  of  France  was  $188.80,  the  Imperial  Bank 
of  Germany,  $402.55.  The  Bank  of  France  showed  over 
2,000,000  transactions  of  less  than  $100,  whereas  our 
national  banks  showed  but  251,000  of  such  transactions. 

Congress  passed  a  refunding  measure  providing  for 
3  per  cent  bonds,  which  were  to  be  the  only  bonds  avail- 
able to  secure  bank  circulation.  The  measure  also 
repealed  the  provision  for  reducing  circulation  by  de- 
posit of  lawful  money,  and  contained  other  restrictions 
and  objectionable  features.  The  bill  reached  President 
Hayes  on  the  last  day  of  his  term,  March  3,  1881, 
and  was  at  once  vetoed.  In  his  messages  and  by  his 
veto  power  President  Hayes  proved  a  strong  and  firm 
defender  of  the  national  credit  and  the  principles  of 
sound  money  throughout  his  administration. 

In  the  absence  of  a  refunding  law,  Secretary  Windom, 
during  the  summer  of  1881,  extended  $538,000,000  of 
5  and  6  per  cent  bonds  at  3  J  per  cent  interest,  redeem- 
able at  the  pleasure  of  the  government.  The  banks 
held  about  $250,000,000  of  these  bonds. 

Comptroller  Knox  obtained  and  reported  data  show- 
ing the  actual  amount  of  cash  that  entered  into  the 
transactions  of  all  national  banks  on  two  business  days, 
viz.   June  30  and   September   17,    1881.     The  average 


THE  NATIONAL  BANKING  SYSTEM  343 

transactions  represented  by  checks  were  95.1  per  cent 
and  94.1  per  cent  respectively,  the  balance  being  in 
actual  money.  Of  the  cash,  paper  currency  represented 
4  per  cent  and  4.36  per  cent  respectively,  coin  supply- 
ing the  balance.  Banks  outside  of  reserve  cities  showed 
81.7  per  cent  of  checks  on  both  days. 

A  curious  and  interesting  controversy  arose  at  this  "Lawful 
time  over  the  proper  construction  of  the  term  "  lawful  teroreted.n" 
money,"  permitted  to  be  deposited  as  a  part  of  the  5  per 
cent  redemption  fund  with  which  to  retire  circulat- 
ing notes,  —  curious  because  it  shows  the  tenacity  with 
which  the  advocates  of  legal  tender  notes  insisted  that 
they  should  be  used  on  all  occasions.  It  was  paralleled 
by  the  fatuous  devotion  of  the  advocates  of  silver  later. 
The  statute  provided  that  the  Treasury  was  to  redeem 
bank-notes  in  "  United  States  notes  "  and  "  legal  tender 
notes."  The  term  "lawful  money"  had  become  inter- 
changeable, in  the  minds  of  legislators,  with  "  legal 
tender  notes,"  and  they  insisted  that  it  did  not  include 
coin.  The  Treasury,  strange  to  say,  clung  to  this 
narrow  construction.  The  banks  maintained  that  gold 
coin  and  silver  dollars  were  "  lawful  money."  The 
.Attorney-general,  to  whom  the  subject  was  referred, 
decided  that  when  a  payment  was  required  to  be  made 
in  promises  to  pay  dollars,  the  dollars  themselves  could 
be  used  for  that  purpose. 

A  bill  to  extend  the  charters  of  existing  banks  for  a  Law  of  1882 
period  of  twenty  years,  after  a  long  and  determined 
opposition,  became  a  law  on  July  12,  1882.  The  advo- 
cates of  more  money,  however,  succeeded  in  incorporat- 
ing into  the  act  a  provision  limiting  the  amount  of  bank- 
notes which  might  be  retired  to  $3,000,000  per  month 
(except  when  bonds  securing  the  circulation  were  called 
for  redemption),  and  banks  reducing  their  circulation 
were  prohibited  from  again  increasing  their  note-issue 


provisions. 


344  CONTEST  FOR  SOUND  MONEY 

for  the  period  of  six  months.     Gold  certificates  were 
provided  for,  and  these,  as  well  as  silver  certificates, 
were  to  be  available  for  bank  reserves, 
important  To  prevent  alleged  discrimination  against  silver  cer- 

tificates, national  banks  were  prohibited  from  being 
members  of  a  clearing-house  where  such  certificates 
were  not  taken  in  payment  of  balances.  This  was 
aimed  at  the  New  York  clearing-house,  which  imme- 
diately thereafter  repealed  its  rule  forbidding  the  use  of 
silver  certificates  in  the  settlement  of  balances.  Provi- 
sion was  made  for  a  3  per  cent  bond  payable,  at  the 
pleasure  of  the  government,  to  be  used  in  funding  the 
extended  3|  per  cents.  The  minimum  bond  deposit 
with  the  United  States  Treasury  for  banks  capitalized 
at  $150,000  or  less  was  fixed  at  one-quarter  of  their 
capital.  This  allowed  a  minimum  bond  deposit  of 
$12,500.  Provision  was  made  for  retiring  the  notes  of 
banks  whose  charters  were  extended,  and  all  gain  by 
the  loss  or  destruction  of  bank-notes  inured  to  the  bene- 
fit of  the  government.  The  over-certification  of  checks 
was  also  forbidden  under  severe  penalty. 

This  legislation  was  obviously  a  compromise,  although 
in  many  respects  favorable  to  the  banks.  For  every- 
thing that  was  obtained  by  the  friends  of  the  banks 
something  had  to  be  yielded.  The  expansionists  suc- 
ceeded in  interfering  with  the  sole  provision  for  flexi- 
bility by  limiting  the  power  of  retiring  notes  at  the 
pleasure  of  the  banks.  An  amendment  to  substitute 
greenbacks  for  national  bank-notes  received  only  71 
votes,  and  the  votes  on  other  amendments  showed  that 
the  greenback  influence  in  Congress  was  on  the  wane. 

This  act  extending  the  charters  of  national  banks 
seemed  to  mark  another  period  and  settle  the  status  of 
the  system.  Since  then  little  serious  effort  has  been 
made  to  legislate  them  out  of  existence  or  to  repeal 


THE  NATIONAL  BANKING  SYSTEM  345 

their  power  to  issue  circulating  notes,  although  it  has 
been  impossible  to  obtain  any  legislation  which  would 
give  to  bank  currency  greater  flexibility  and  make  it 
responsive  to  the  needs  of  commerce. 

Shortly  after  the  enactment  of  the  law  of  1875  bank  Bank 
capital  reached  a  maximum  of  $505,000,000.  It  fell  to 
$454,000,000  in  October,  1879,  recovering  to  $477,000,- 
000  July  1,  1882.  Circulation  (not  including  that  against 
which  lawful  money  had  been  deposited)  showed  a 
minimum  of  $298,000,000  and  a  maximum  of  $325,000,- 
000,  both  in  1 88 1.  Individual  deposits  at  the  beginning 
of  the  period  were  $683,000,000,  at  the  end  $1,067,000,- 

000,  and  loans  increased  from  $956,000,000  to  $1,209,- 
000,000.  Gauged  by  their  capital  the  banks  could  have 
issued  $121,000,000  more  notes  than  they  had  on  July 

1,  1882,  but  the  demand  for  bank-notes  was  lessened  by 
the  existence  at  this  time  of  $54,500,000  silver  certifi- 
cates which  had  come  into  use.  The  increase  in  the 
number  of  banks  was  only  212,  of  which  124  were  added 
in  the  last  year.  The  losses  sustained  after  the  panic 
of  1873  and  the  disturbances  in  1 876-1 877  were  so  large 
that  the  aggregate  surplus  fund  was  reduced  to  $114,- 
000,000  (from  $130,000,000).  This  was  recovered  dur- 
ing 1 880- 1 882.     Earnings  receded  from  9.7  per  cent  to 

5.1  per  cent,  recovering  to  8.9  per  cent.  Forty-nine  Failures  of 
banks  failed,  25  of  which  suspended  in  1877-1878.  banks- 
Of  the  failed  banks  21  paid  creditors  in  full,  and  the 
balance  nearly  in  full.  The  tax  paid  by  the  banks 
on  circulation  in  1864- 1882  amounted  to  $50,700,000, 
and  the  tax  on  capital  and  deposits  to  $62,600,000, 
a  total  of  $113,300,000.  In  addition,  state  taxes  now 
averaged  more  than  $8,000,000  annually,  so  that  the 
rate  of  taxes  paid  yearly  was  equal  to  3.7  per  cent  on 
the  capital. 

Despite  the  utmost  freedom  given  by  the  act  of  1875 


346 


CONTEST  FOR  SOUND  MONEY 


to  bank  circulation,  the  Western  and  Southern  states 
still  had  only  $105,000,000,  against  $250,000,000  in  the 
Middle  and  Eastern  states. 

State  banks,  of  which  only  incomplete  reports  were 
available,  showed  an  increase  of  121  in  number  and 
$23,000,000  in  capital.  They  had  increased  their  sur- 
plus from  less  than  $7,000,000  to  more  than  $23,000,000, 
their  deposits  by  $116,000,000,  and  their  loans  by 
$96,000,000. 

The  relative  supply  of  banking  facilities  of  the  several 
sections  of  the  country  is  concisely  stated  in  the  follow- 
ing table  compiled  from  the  reports  of  the  Comptroller 
of  the  Currency.  Savings  banks  are  here  included, 
which  give  the  Eastern  and  Middle  states  a  great  pre- 
ponderance. The  savings  banks  of  California  in  the 
same  manner  increase  the  per  capita  of  the  Western  sec- 
tion. An  almost  total  absence  of  such  institutions  in 
the  Southern  states  is  a  remarkable  fact  in  the  economic 
history  of  that  section. 


States 

Banking  Power 
(In  millions) 

Per  Capita 

1870 

1880 

1870 

1880 

Eastern  .     .     . 
Middle   .     .     . 
Southern      .     . 
Central   .     .     . 
Western      .     . 

637 
IO46 

H7 

3" 
61 

707 
1335 

462 
140 

$182.51 

107.64 

II.23 

27.65 

60.61 

$176.37 

113.50 

10.36 

26.86 

73-07 

All     .     .     . 

2202 

2802 

57-°9 

55-88 

The  increase  in  banking  power  in  the  Southern  and 
Central  states  did  not  keep  pace  with  the  growth  of 
population,  which  accounted  for  the  strength  there  of 
the  "  greenback  movement." 


THE  NATIONAL  BANKING  SYSTEM 


347 


STATISTICAL  RESUME 

(Amounts  in  millions  of  dollars) 

Condition  of  National  Banks 

(at  dates  nearest  January  i) 


Year 

Number 

Capital 

Deposits 

Circula- 
tion 

Specie 

Legal 
Tenders 

Loans 

1876.     .     .     . 

2086 

505 

629 

315 

17 

102 

963 

1877.     . 

2082 

497 

631 

292 

33 

92 

929 

1878  .      . 

2074 

477 

615 

299 

33 

97 

882 

1879.     . 

2051 

462 

707 

304 

41 

99 

824 

1880  .     . 

2052 

454 

766 

322 

79 

66 

934 

1881  .     . 

2095 

459 

1018 

317 

107 

65 

1071 

1882  .     . 

2164 

466 

"»5 

325 

114 

68 

1 169 

State  Banks  and  Trust  Companies 


State  Banks1 

Trust  Companies 

Number 

Capital 

Deposits 

Cash 

Loans 

Aggregate 
Resources 

1876  . 

1877 . 

1878  . 

1879 . 

1880  . 

1881  . 

1882  . 

633 
592 

475 
616 
620 
652 
672 

80 
III 

95 
104 

9i 
93 
92 

158 
227 

143 
167 
209 
26l 
282 

30 

37 
32 
39 
55 
41 
42 

I79 
267 
169 
I9I 
207 

251 
272 

128 
124 
III 
112 
127 
157 

»95 

1  This  table  has  little  value  for  comparative  purposes;   reports  from  six 
to  twelve  states  are  missing  after  1876,  but  again  included  in  later  years. 


348  CONTEST  FOR  SOUND  MONEY 

New  York  Clearing-house  and  Savings  Banks 


Year 

New  York 

Clearing-house 

Exchanges 

Savings  Banks,  U.  S. 

Failures 

(Millions) 

Depositors 
(ooo's) 

Deposits 
(Millions) 

Average 
Deposit 

Num- 
ber 
(ooo's) 

Liabili- 
ties 
(Millions) 

1876 
1877 
1878 
1879 
1880 
1881 
1882 

21.597 
23.289 
22.508 
25.178 
37.182 
48.565 
46.552 

2,369 

2,395 
2,401 
2,269 
2,336 
2,529 
2,710 

94I 

866 

880 
802 
819 
892 
967 

$397 
361 
366 

354 
35 r 
353 
357 

9 

9 

10 

7 
5 
6 

7 

191 
191 

234 
98 

66 

81 

102 

United  States  Bonds,  and  Bank  Circulation 


Year 

H  g  g 

.05 

WU.O 

r*  5 

H  5  3 

td  S 

j     0 

93 

K  U 
y  a 

,50 

Silver 
ertificates 

IN 
IRCULATION 

Price  01 

•  Bonds1 

(June  30) 

High 

Low 

ieU 

O 

+    1 

CJ     0 

1865.     .     .     . 

mo 

236 

131 

+  I05 



II2| 

i°3l 

1866 

1213 

327 

268 

+  137 



"4| 

103I 

1867 

1634 

341 

292 

+     24 



"3i 

106I 

1868 

2092 

341 

295 

+     3 



II8J 

io8| 

1869 

2167 

343 

293 

—     2 



I25 

in 

1870 

2051 

342 

292 

—     1 



"8i 

II2f 

1871 

1953 

360 

316 

+  24 



"9f 

I  io£ 

1872 

1845 

380 

327 

+   11 



"3l 

I07J 

1873 

1760 

390 

339 

+   12 



n6£ 

106^ 

1874 

1789 

391 

339 





117 

III 

1875 

1773 

376 

3i8 

—    21 



119 

"3l 

1876 

1 761 

34i 

294 

-    24 



119 

110} 

1877 

1762 

339 

290 

-     4 



II2f 

i°5i 

1878 

1845 

35° 

300 

+   10 



i°7f 

103 

1879 

1952 

354 

3°7 

+     7 



i°4i 

99 

1880 

1775 

362 

3i8 

+  11 

6 

"3§ 

103 

1881 

1690 

360 

312 

-     6 

39 

u8| 

II2| 

1882 

»5J4 

358 

3°9 

-     3 

•55 

I2lf 

»7i 

1  6's  of  1881,  to  1872;   5's  of  1881,  to  1878;  4's  of  1907  later. 


CHAPTER   XVI 

I883  TO   189O 

During  the  period  now  under  discussion  the  banks 
were  a  neglected  factor  in  currency  affairs  of  the  coun- 
try; the  government  seemingly  having  assumed  the 
province  of  furnishing  circulating  media,  no  legislation 
relating  to  banks  was  enacted  or  seriously  considered. 

Henry  W.  Cannon  became  Comptroller  of  the  Cur-  Crisis  of 
rency  in  1884,  succeeding  John  Jay  Knox.  In  May  of  *  4' 
that  year  a  serious  financial  crisis,  produced  by  condi- 
tions in  the  country  generally,  but  practically  limited  in 
its  manifestation  to  New  York  City,  caused  numerous 
suspensions,  including  two  large  national  banks.  The 
crisis  was  caused  largely  by  undue  expansion  of  loans 
induced  by  speculation  in  securities.  The  New  York 
banks  again  issued  clearing-house  loan  certificates  to  be 
used  in  settling  debit  balances,  the  first  bearing  date 
May  15,  and  the  maximum  amount  being  $24,91 5,000. 
They  were  practically  retired  by  July  1.  The  fact  that 
the  certificates  were  promptly  issued  served  to  restore 
confidence  in  a  short  time,  and  prevented  more  serious 
consequences. 

The  withholding  of  money  from  deposit  in  banks  and  Causes  of 
savings  banks,  the  strengthening  of  their  cash  resources 
by  interior  banks,  which  caused  a  corresponding  reduc- 
tion of  their  balances  in  New  York,  necessarily  pro- 
duced a  stringency.  Any  degree  of  fear  or  anxiety 
which  induces  the  wage-earners  employed  by  our  large 
stores,  factories,  railroads,  and  employers  of  labor  gen- 

349 


350  CONTEST  FOR  SOUND  MONEY 

erally,  to  keep  the  money  received  from  the  pay  roll 
instead  of  depositing  or  spending  the  same,  materially 
and  immediately  affects  the  volume  of  money  in  circu- 
lation. The  banks  under  the  rigid  currency  laws  were 
powerless  to  afford  relief.  They  could  not  buy  bonds 
required  to  be  deposited  as  security  for  circulation  with- 
out investing  more  money  in  bonds  than  they  would 
receive  circulation  in  return.  Had  they  borrowed  the 
bonds  it  would  have  required  about  forty-five  days  after 
depositing  them  before  the  circulation  could  be  prepared 
for  delivery.  The  banks  protected  and  retained  their 
cash  reserves  by  suspending  cash  payments  as  between 
themselves,  and  using  loan  certificates  in  payment  of 
clearing-house  debits.  The  crisis  thus  proclaimed  un- 
doubtedly drove  money  into  hiding  and  prevented 
the  banks  from  strengthening  their  reserves  by  the 
usual  receipts  of  currency. 
Clearing-  The  important  and  valuable  function  which  clearing- 

cates.  house  certificates  perform,  and  the  only  one  which  justi- 

fies their  use,  is  the  temporary  inflation  of  currency  which 
they  in  a  manner  produce.  A  bank  may  deposit  with 
the  clearing-house  $1,250,000  of  its  assets  and  receive 
$1,000,000  of  loan  certificates.  It  then  can  loan  to  its 
customers  $  1 ,000,000  and  meet  and  pay  the  checks  drawn 
against  such  loans,  in  the  clearing-house  exchanges, 
with  the  $1,000,000  loan  certificates  it  has  received. 
It  may  then  deposit  the  assets  taken  for  said  $1,000,000 
of  loans  with  the  clearing-house  and  receive  $800,000 
in  loan  certificates.  It  could  then  in  turn  loan  its  cus- 
tomers $800,000  and  settle  for  the  same  through  the 
clearing-house  exchanges  with  the  $800,000  of  loan  cer- 
tificates received,  a.nd  so  on.  This  illustration  is  given 
to  show  the  extent  to  which  banks  might  extend  accom- 
modations to  their  customers  without  the  use  of  actual 
currency.     Of  course  the  issuing  or  withholding  of  loan 


THE  NATIONAL  BANKING  SYSTEM  351 

certificates  rests  wholly  with  the  clearing-house  authori- 
ties, and  each  particular  application  is  determined  by 
them  upon  its  merits.  .  The  beneficial  results  which  these 
loan  certificates  have  produced  rest  wholly  upon  the 
fact  that  the  banks  while  maintaining  their  reserves  by 
retaining  their  currency  have  been  enabled  to  extend  to 
the  public  whatever  assistance  it  may  have  required.  A 
statement  of  the  several  issues  of  such  certificates  at 
New  York  appears  on  page  375. 

Their  charters  had  been  extended  by  the  law  of  1882,  Contraction 

of  bank  cir- 

and  the  banks  were  recognized  as  a  permanent  part  of  cuiation. 
our  monetary  system,  but  many  things  militated  against 
the  increase  of  their  note-issues.     As  we  have  seen,  the 

3  per  cent  bonds,  constituting  a  large  portion  of  the 
public  debt,  were  redeemable  at  the  pleasure  of  the  gov- 
ernment, and  were  being  rapidly  retired  with  the  large 
Treasury  surplus  and  likely  to  be  called  at  any  time, 
hence  were  undesirable  as  a  basis  for  note-issue,  since, 
in  case  the  bonds  were  redeemed,  a  bank  would  have 
to  purchase  and  substitute  others.  All  other  issues 
of  government  bonds  commanded  high  premiums,  the 

4  per  cents  standing  at  129,  which  rendered  the  issue  of 
circulation  based  upon  them  unprofitable. 

Another  powerful  factor  in  reducing  bank  circulation  Influence  of 

*  °  silver  pur- 

was  the  fact  that  the  government  was  purchasing  silver,  chases. 

coining  silver  dollars,  and  issuing  certificates,  at  the 
minimum  rate  of  $2,000,000  per  month,  and  using  all  the 
power  of  the  Treasury  to  force  them  into  circulation  in 
order  to  prevent  going  upon  a  silver  basis.  The  crusade 
in  favor  of  free  coinage  of  silver  monopolized  the  atten- 
tion and  sympathy  of  Congress  to  such  an  extent  that  it 
continuously  refused  to  permit  banks  to  issue  circulation 
to  the  par  of  bonds,  retaining  the  limit  at  90  per  cent 
notwithstanding  the  fact  that  the  bonds  commanded  a 
premium   of   nearly    30  per  cent.     The  entire  absence 


352 


CONTEST  FOR  SOUND  MONEY 


System 
inelastic. 


Cannon's 
proposed 
remedy. 


of  elasticity,  which  every  bond-secured  currency  must 
possess,  as  well  as  the  growing  premium  on  and  lessening 
volume  of  United  States  bonds,  induced  economists  to 
consider  a  bank  currency  without  such  bonds  as  security, 
which  would  be  quite  as  safe  and  more  responsive  to 
business  necessities.  Comptroller  Henry  W.  Cannon 
was  the  first  official  to  discuss  and  recommend  such  a 
currency  issue.  He  suggested  as  security  a  guarantee 
fund  to  be  accumulated  from  the  tax  on  circulation,  the 
gain  on  lost  notes,  and  the  interest  on  the  redemption 
fund  in  the  Treasury. 

Examining  and  analysing  the  statistics  of  the  104 
national  banks  that  had  failed  up  to  that  time,  with 
a  view  to  demonstrating  the  security  to  note  holders 
under  the  proposed  plan,  he  said :  — 

"The  experience  with  these  104  banks  shows  almost  con- 
clusively that  if  their  issues  to  the  amount  of  65  per  cent  of 
their  capital  had  been  secured  by  a  deposit  of  bonds  to  an 
equal  amount,  the  remaining  25  per  cent  might  have  been 
issued  without  other  security  than  a  first  lien  on  the  general 
assets ;  and  if  a  safety  fund  had  been  in  existence  it  would  in 
the  case  cited  have  been  drawn  upon  to  the  extent  of  $62,000 
only  upon  a  circulation  amounting  to  $5,464,700.  For  a  be- 
ginning, therefore,  it  might  be  safe  to  authorize  banks  to  issue 
circulation  amounting  to  90  per  cent  of  their  capital,  70  per 
cent  to  be  secured  by  an  equal  amount  of  United  States  bonds 
at  par  value,  the  remaining  20  per  cent  being  issued  without 
other  security  than  a  first  lien  on  such  assets.  But  if  the  law 
should  provide  for  the  accumulation  of  a  safety  fund  in  the 
manner  suggested,  then  as  such  safety  fund  increased  the  per- 
centage of  circulation  unsecured  by  bonds  might  be  increased 
as  the  diminution  of  the  public  debt  might  require  and  the 
safety  fund  warrant." 

William  L.  Trenholm  became  Comptroller  of  the  Cur- 
rencyin  1886.  InthatyearCongress  authorized  banks,  by 
a  two-thirds  vote,  to  increase  their  capital  or  change  their 


THE  NATIONAL  BANKING  SYSTEM  353 

location,  and  in  1887  prescribed  conditions  under  which  Minor 

.  .  .    ,       ,  1  ,  .  .  changes  in 

cities  might  become  reserve  and  central  reserve  cities.  iaw. 
Chicago  and  St.  Louis  became  central  reserve  cities  like 
New  York,  and  three  reserve  cities  were  added.  At  this 
time  a  question  arose  as  to  the  legality  of  using  bonds  on 
which  interest  had  ceased  (after  being  called  for  redemp- 
tion), as  security  for  circulation.  The  Attorney-general 
decided  that  under  the  law  such  bonds  were  not  availa- 
ble and  must  be  replaced. 

Although  by  1887  banks  had  increased  largely  in 
number,  and  their  capital  had  also  grown,  their  circula- 
tion was  reduced  to  $167,000,000.  A  presidential  elec- 
tion was  at  hand,  and  the  trend  of  public  sentiment  and 
political  conditions  is  suggested  by  the  fact  that  the 
oft-repeated  proposition  to  substitute  greenbacks  for 
national  bank-notes  was  defeated,  at  this  time,  by  the 
close  vote  of  23  to  22  in  the  Senate. 

Secretary  Fairchild  had  endeavored  to  counteract  the  Surplus 
absorption   of    money  by  the  Treasury   by   depositing  deposited  i 
surplus  revenues  with  banks.     There  were  290  bank  banks, 
depositories    at   this   time,   and  they   held    $60,000,000 
of  the  Treasury  surplus  amply  secured  by  government 
bonds.     The  Republicans  severely  criticised  this  policy 
in  the  ensuing  campaign  as  opening  the  door  to  political 
favoritism.      They  have  since  paid  Mr.    Fairchild  the 
compliment  of  adopting  and  extending  his  policy.     The 
number  of  such  depositories,  May  1,  1903  (under  Secre- 
tary Shaw  and  President  Roosevelt),  was  257,  and  the 
amount  of  surplus  Treasury  money  on  deposit  with  them 
was  $142,959,727.12. 

Benjamin  Harrison  became  President  in  1889,  and 
early  in  his  administration  Edward  S.  Lacey  was 
appointed  Comptroller  of  the  Currency.  The  new 
administration  secured  no  more  attention  for  its  recom- 
mendations relative  to  bank  currency  than  its   prede- 


354  CONTEST  FOR  SOUND  MONEY 

cessor.      The   all-absorbing,  crucial   question  was   how 
to   placate  the  silver  advocates  and  still  remain  upon 
a  gold  basis. 
Windom's  William  Windom  had  succeeded  Fairchild  as  Secretary 

po  icy.  Q£  t^e  Treasurv>  and  following  the  logic  of  the  campaign 

began  reducing  the  Treasury  funds  in  banks.  As  the 
gurplus  locked  up  in  the  Treasury  was  thus  increased, 
the  year  1889  closed  with  an  uneasy  feeling  in  the 
money  market,  rates  for  a  period  ruling  from  30  to  40 
per  cent.  Windom's  plan  for  the  placation  and  utili- 
zation of  silver  eventuated  in  the  law  of  1890,  fully 
discussed  in  another  chapter. 

The  enormous  Treasury  surplus  had  been  made  promi- 
nent in  the  presidential  campaign,  and  the  relief  deter- 
mined upon  was  reduction  of  taxation.  The  protection 
influence  dominated,  and  the  McKinley  act  of  1890 
retained  the  duty  upon  articles  produced  in  this  country 
and  removed  or  reduced  the  duties  upon  sugar  and  other 
large  revenue-yielding  commodities  not  produced  to  any 
considerable  extent  in  the  United  States, 
stringency  of  During  the  summer  and  early  fall  of  that  year  the 
money  stringency,  which  had  been  foreshadowed  by  the 
growing  surplus,  occurred,  and  the  application  of  the 
Treasury  funds  to  bond  redemptions  amounted  to  over 
$100,000,000.  Aside  from  the  much  criticised  policy 
of  depositing  money  in  banks,  the  only  means  of  coun- 
teracting the  demoralization  of  business  whenever  the 
government's  income  exceeds  its  expenditures  under  our 
subtreasury  system  of  withdrawing  money  from  chan- 
nels of  trade,  is  the  "  steady  by  jerks  "  method  of  buying 
bonds,  first  practised  by  Secretary  Guthrie  in  1854,  and 
continued  by  every  Secretary  since  that  day,  when  the 
surplus  was  large.  It  was  the  only  recourse  available 
to  Windom  under  the  circumstances.  In  the  month 
of  September   alone   over   $62,000,000   was   disbursed 


THE  NATIONAL  BANKING  SYSTEM  355 

by   the   Treasury   for   bonds   and   anticipated   interest 
payments. 

The  suspension  of  Barings  in  November  of  this  year 
caused  a  severe  crisis  in  London  and  produced  scarcely 
less  effect  in  New  York.  The  Bank  of  England  came 
to  the  rescue  and  eventually  restored  the  Barings  to 
solvency. 

The  underlying  fear  that  the  monetary  policy  of  the  Clearing- 
government  would  eventually  force  the  country  upon  a  ^^^^ 
silver  basis  rendered  the  business  interests  peculiarly 
sensitive.  Credit  was  easily  disturbed  and  withheld. 
Under  the  circumstances  the  gravity  of  the  situation  in 
London  easily  precipitated  a  quasi  panic  in  New  York, 
and  the  banks  again  resorted  to  clearing-house  loan 
certificates  on  November  12.  The  date  of  the  last  issue 
was  December  7,  and  final  retirement  occurred  February 
7,  1 891.  The  total  issue  was  $16,645,000  and  the  maxi- 
mum amount  outstanding  at  one  time  was  $15,205,000. 
Boston  and  Philadelphia  banks  adopted  the  same  course 
to  relieve  the  stringency,  the  former  issuing  $5,065,000 
and  the  latter  $8,820,000  of  such  auxiliary  currency.  No 
attempt  was  made  by  Congress  to  provide  means  whereby 
the  banks  could  afford  relief  under  such  circumstances 
to  all  sections  of  the  country,  instead  of  leaving  relief 
to  clearing-house  loan  certificates  available  only  in  the 
larger  cities,  amounting  to  a  partial  suspension  of 
currency  payments  and  producing  evil  results  which 
approximate  the  amount  of  good  they  do. 

In  1890  Comptroller  Lacey  obtained  data  showing  Domestic 
the  amount  of  domestic  exchange  drawn  by  the  national  statistics6 
banks  for  the  year.  For  the  purpose  of  verification  he 
obtained  similar  facts  in  1891.  These  data  showed  the 
amount  in  the  aggregate  to  be  $13,000,000,000,  and  he 
estimated  that  the  state  banks  drew  half  as  much  more, 
making  an   aggregate   of    $19,500,000,000.     Sixty  per 


356 


CONTEST  FOR  SOUND  MONEY 


Growth  of 

national 

system. 


cent  of  the  total  was  drawn  upon  New  York.  The 
cost,  or  charge  for  exchange,  as  reported  by  national 
banks,  varied  from  I  cent  to  21  cents  per  $100  and 
averaged  8£  cents.  At  the  rate  of  \\  per  cent,  pre- 
vailing in  1859,  the  cost  to  the  people  of  the  exchange 
thus  furnished  by  national  banks  would  approximate 
$195,000,000,  whereas  the  cost  in  1890  was  slightly 
over  $11,000,000.  This  reduction  in  cost  of  exchange 
was  not  due  entirely  to  the  national  banking  system,  but 
that  system  contributed  largely  to  bringing  about  such 
saving. 

The  national  banking  system,  designed,  as  we  have 
seen,  to  give  the  people  a  permanent  paper  currency, 
lacked  the  necessary  support  even  in  the  ranks  of  those 
who  had  created  it.  Only  by  the  most  strenuous  efforts 
was  the  system  able  to  survive  the  political  attacks  upon 
the  one  hand  and  the  untoward  conditions  of  a  decreas- 
ing volume  and  enhancing  prices  of  bonds  (hence 
diminution  of  profits)  on  the  other.  Moreover,  the 
introduction  of  the  two  forms  of  silver  paper  (certifi- 
cates and  Treasury  notes  of  1890)  materially  lessened 
the  demand  for  bank-notes.  Nevertheless,  as  a  system 
of  banks  of  deposit  and  discount,  under  the  regulation 
of  federal  law,  it  kept  pace  with  the  commercial  devel- 
opment of  the  country.  Its  growth  was  especially 
marked  in  the  states  from  which  the  principal  opposi- 
tion came.  Of  the  1545  active  banks  added  to  the  list 
since  1882,  Texas  had  contributed  195,  Missouri  61,  the 
Dakotas  67,  Kansas  134,  Nebraska  127,  and  Iowa  75. 
Other  Southern  and  Western  states  also  showed  substan- 
tial increases,  although  they  were  still  far  from  ade- 
quately provided  with  banking  facilities.  The  capital 
of  national  banks  in  these  states  increased  from  $138,- 
200,000  to  $322,500,000  during  the  period  since  1882. 
The  increase  for   the  entire  country  included  capital 


THE  NATIONAL  BANKING   SYSTEM 


357 


$140,000,000,  surplus  and  profits  $113,000,000,  individ- 
ual deposits  $370,000,000,  loans  $603,000,000,  and  cash 
holdings  $78,000,000.  The  circulation  was,  however, 
diminished  by  $183,000,000.  Measured  by  their  capital 
the  banks  could  under  the  law  have  issued  $556,000,000 
of  notes.  The  amount  actually  outstanding  was  $126,- 
000,000,  or  about  20  per  cent  of  their  capital. 

The  circulation  outstanding  covered  by  lawful  money 
deposits  (representing  the  notes  of  failed,  liquidating, 
and  reducing  banks)  stood  at  $36,800,000,  only  slightly 
in  excess  of  the  amount  ten  years  prior ;  but  during  the 
period  the  amount  of  such  notes  had  risen  to  $107,500,000, 
in  1887,  which  marked  the  date  of  greatest  contraction. 

The  act  of  July  14,  1890,  directed  that  the  funds  held 
in  trust  in  the  Treasury  for  redemption  of  these  notes  be 
turned  into  the  general  cash  of  the  Treasury,  and  the 
notes  assumed  as  part  of  the  public  debt. 

The  earnings  of  the  banks  calculated  upon  capital  and  Earnings  of 

1)3.  nits 

surplus  ranged  between  6.9  per  cent  and  8.9  per  cent, 
and  dividends,  on  capital  alone,  from  8.6  to  7.8  per  cent, 
with  a  declining  tendency. 

Greater  efforts  than  ever  before  were  made  during 
the  period  to  obtain  fuller  data  relating  to  state  banks, 
private  banks,  and  trust  companies.  The  report  for  1891 
showed  the  following  comparison  as  to  state  banks  :  — 


Year 

Number 

Capital 

Deposits 

Loans 

Total 
Resources 

1881     .     .     . 
1891     .     .     . 

652 
2572 

92.9 
208.6 

261.4 
556.6 

250.8 
623.2 

438.8 
906.O 

While  the  increase  thus  shown  was  no  doubt  in  part  state  banks, 
due  to  the  more  complete  returns  in  the  latter  year,  it  is 
obvious  that  these  banks  more  than  doubled  in  number 


358 


CONTEST  FOR  SOUND  MONEY 


and  importance  during  the  decade.  Examination  shows 
that  this  was  due  in  great  measure  to  the  fact  that  the 
national  system  proved  less  inviting  to  capital  in  the 
sections  showing  the  greatest  growth.  The  provisions 
of  state  laws  for  small  banks,  capitalized  at  $10,000  or 
even  less,  accounted  for  much  of  this  preference. 

Trust  and  loan  companies  showed  increased  resources 
for  the  same  period  from  $156,500,000  to  $536,600,000 
and  savings  banks  deposits  grew  from  $891,900,000  to 
$1,623,500,000. 

Appended  is  a  table  showing  the  aggregate  banking 
power  of  the  country,  indicating  the  per  capita,  and 
illustrating  further  the  great  lack  of  banking  facilities 
in  the  sections  which  continually  clamored  for  measures 
calculated  to  result  in  unsound  currency.  The  two 
phenomena  are  unquestionably  correlated.  The  higher 
interest  rates  exacted  in  localities  not  well  supplied  with 
capital  and  credit  facilities  —  a  disparity  which  is  a  seri- 
ous burden  upon  all  productive  industry  —  tends  to 
induce  those  who  suffer  therefrom  to  support  any  means 
suggested  to  remedy  the  evil,  and  too  often  the  proposed 
remedies  have  been  such  as  would  actually  render  con- 
ditions worse. 


States 

Banking  Power 
(In  millions) 

Per  Capita 

1880 

1890 

1880 

1890 

Eastern  .     .     . 
Middle    .     .     . 
Central   .     .     . 
Southern     .     . 
Western       .     . 

707 

1335 

462 

158 
I40 

1229 

2410 

1 184 

387 

403 

1  176.37 

II3.50 

26.86 

IO.36 

73-07 

$261.86 
1 70.92 

54-29 

2*1.15 

107.15 

All     .     .     . 

2802 

5613 

55-88 

89.85 

THE  NATIONAL  BANKING  SYSTEM 


359 


STATISTICAL   RESUME 
(Amounts  in  millions  of  dollars) 
Condition  of  National  Banks 
(at  dates  nearest  January  i) 


Year 

Number 

Capital 

Deposits 

Circula- 
tion 

Specie 

Legal 
Tenders 

Loans 

1883  . 

2308 

485 

1080 

315 

106 

77 

1230 

1884  . 

2529 

512 

1 1 20 

305 

114 

91 

1307 

1885  . 

2664 

524 

I002 

280 

140 

95 

1234 

1886  . 

2732 

529 

1 1 26 

267 

165 

79 

1344 

1887  . 

2875 

551 

1 188 

202 

167 

74 

1470 

1888  . 

3070 

58i 

1279 

165 

159 

82 

1584 

1889  . 

3I50 

594 

1382 

144 

173 

92 

1677 

1890  . 

3326 

618 

I480 

126 

171 

94 

1812 

United  States  Bonds  and  Bank  Circulation 


Total 

Bonded 

Debt 

Held  as 

Nat'l 

-(-In- 

Silver 

-(-In- 

Price op 

Bonds1 

Year 

Security 
for  Cir- 
culation 

Bank 
Circu- 
lation 

crease 
-  De- 
crease 

Certifi- 
cate Cir- 
culation 

crease 
-De- 
crease 

(June  30) 

High 

Low 

1883  . 

1389 

353 

312 

+  3 

73 

+  18 

"5* 

1  1  Si 

1884  . 

1277 

331 

295 

-  17 

96 

+  23 

124I 

11. Si 

1885  . 

1247 

312 

269 

-26 

102 

+  6 

124| 

I2I| 

1886  . 

1 196 

276 

245 

-24 

88 

-  '4 

I29| 

123 

1887  . 

1072 

192 

167 

-78 

142 

+  54 

129I 

i24i 

1888  . 

IOOI 

178 

155 

—  12 

201 

+  59 

130 

1231 

1889  . 

880 

148 

129 

-26 

257 

+  56 

"9J 

I26± 

1890  . 

776 

H5 

126 

-  3 

298 

+  4i 

126I 

I2l£ 

^'s  of  1907. 


360 


CONTEST  FOR  SOUND  MONEY 


State  Banks,  Trust  Companies,  Private  Banks 


State  Banks 

Trust 
Company 

Re- 
sources 

Year 

Number 

Capital 

Deposits 

Cash 
and 
Cash 
Items 

Loans 

Private 
Bank 
Re- 
sources 

1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 

754 
817 

975 
849 
Hi3 
1403 
1671 
2101 

103 

no 

125 
I IO 
141 

155 
167 
189 

335 
325 
344 
343 
447 
410 

5°7 
553 

78 
82 
87 
91 
III 

io5 
i33 
121 

322 
331 
348 
331 
436 
432 

505 

582 

212 

24O 
248 
278 

3l9 
384 
441 

5°4 

394 

174 
164 

H3 
164 

Miscellaneous  Financial 


Clearing-house 
Exchanges 
(In  millions) 

Savings  Banks 

Failures 

New  York 

United 
States 

Depositors 
(ooo's) 

Deposits 
(Millions) 

Average 
Deposits 

Number 
(ooo's) 

Liabilities 
(Millions) 

1883 

40,293 

5r,73i 

2876 

IO25 

#356 

9 

173 

1884 

34,092 

44,200 

30I5 

I073 

356 

11 

226 

1885 

25,251 

4M74 

307I 

1095 

357 

11 

124 

1886 

33,375 

49,294 

3158 

1 141 

361 

10 

"5 

1887 

34,873 

5J.H7 

3418 

1235 

361 

10 

168 

1888 

30,864 

49,54i 

3838 

1364 

355 

11 

124 

1889 

34,796 

56,175 

4021 

1425 

354 

11 

149 

1890 

37,661 

60,624 

4258 

1525 

358 

11 

190 

PART   THREE 
FROM    1891    TO   THE   PRESENT   DAY 


CHAPTER   XVII 

Silver   Contest   of    1896 
1 891  to  1896 

The  retention  of  the  national  bank  system  was  vir-  The  currency 
tually  settled  by  the  law  of  1882  enabling  banks  to  m  9°' 
extend  their  charters  for  a  period  of  twenty  years.  Al- 
though opposition  did  not  thereafter  cease,  it  very 
materially  subsided.  The  Supreme  Court  having  de- 
cided that  Congress  had  unlimited  power  to  issue  legal 
tender  notes  at  any  time,  these  notes  became  a  settled 
factor  in  our  currency  system,  with  little  hope,  in  view 
of  popular  sentiment,  of  their  retirement.  The  status  of 
silver  was  undetermined  and  in  sharp  controversy,  — 
free  coinage  at  the  ratio  of  16  to  1  the  contention 
of  one  party,  the  repeal  of  the  existing  silver  purchase 
law,  the  contention  of  the  friends  of  the  gold  standard. 
Gold  was  the  standard  of  value,  but  silver  was  being 
purchased  at  the  rate  of  4,500,000  ounces  per  month  and 
legal  tender  coin  notes  issued  in  payment  therefor.  It 
was  only  a  question  of  time  when  the  continued  pur- 
chase of  this  vast  amount  of  silver,  practically  redeem- 
able in  gold,  would  exhaust  the  credit  of  the  government 
and  force  it  upon  a  silver  basis.  The  question  whether 
the  standard  should  be  gold  or  silver  was  paramount, 
and  all  forms  of  our  currency  were  so  closely  related  to 
the  standard  that  they  will  be  considered  together  in  this 
and  the  following  chapter. 

The  financial  and  monetary  conditions  of  the  whole 

363 


crisis. 


364  CONTEST  FOR  SOUND  MONEY 

The  silver  commercial  world  were  affected  by  the  position  which 
this  country  had  assumed  respecting  silver.  By  careful 
management  the  gold  surplus  of  the  Treasury  had  been 
increased  to  nearly  $219,000,000  in  1888.  The  estimated 
stock  of  gold  in  the  country  at  the  same  time  was  over 
$700,000,000.  We  had  retained  all  of  our  gold  product, 
then  averaging  more  than  one-quarter  of  the  world's 
output,  and  had  imported  more  than  we  exported. 

The  Baring  The  embarrassment  of  Baring  Brothers  of  London, 
which  culminated  in  November,  1890,  precipitated  a 
severe  stringency  in  the  money  market  in  London  which 
had  its  counterpart  in  New  York.  The  Barings  were 
financing  vast  undertakings  in  South  America  and  else- 
where, which  they  were  unable  to  carry  through.  The 
Bank  of  England  took  charge  of  their  affairs,  managed 
the  same  most  successfully,  and  eventually  restored  the 
Barings  to  solvency  and  strength.  In  order  to  do  this 
the  Bank  of  England  at  that  time  found  it  convenient  to 
borrow  from  the  Bank  of  France  $15,000,000  in  gold. 
The  incident  was  regarded  as  a  warning,  and  in  order  to 
strengthen  their  reserves  European  banks  generally 
began  to  make  extraordinary  efforts  to  obtain  gold  from 
all  points,  but  mainly  from  the  United  States.  The 
Bank  of  England,  by  raising  its  discount  rate  and  by 
raising  the  price  which  it  will  pay  for  gold  bars  or 
foreign  coin,  can  measurably  protect  its  gold  supply. 
In  addition  to  these  safeguards  the  Bank  of  France 
goes  farther  and  refuses  to  pay  notes  and  drafts  entirely 
in  gold,  offering  a  portion  in  gold,  the  balance  in  silver,  or 
exacts  a  premium  on  gold  desired  for  export.  The  United 
States  Treasury  has  no  safeguards  whatever  against  with- 
drawals of  gold,  and  hence  ours  is  the  easiest  market 
from  which  other  nations'  necessities  may  be  supplied. 

By  the  end  of  the  fiscal  year  1890  over  $54,000,000 
gold   had   been   exported    notwithstanding  a  favorable 


SILVER   CONTEST  OF  1896  365 

trade  balance,  showing  conclusively  a  return  of  Ameri-  inflation 
can  securities  from  abroad.  The  inflation  resulting  exports. 
from  the  silver  purchase  act  made  money  easier,  and 
accelerated  the  drain  of  gold.  Following  the  return 
flow  of  money  to  New  York  after  the  crops  of  1890 
were  harvested,  heavy  exports  of  gold  were  resumed  in 
January,  1891,  the  net  exports  for  the  fiscal  year  having 
been  $68,000,000.  General  business  activity  and  a  con- 
tinuous demand  for  money  in  the  fiscal  year  ending 
June  30,  1892,  together  with  a  favorable  trade  balance 
resulting  largely  from  bountiful  crops  in  189 1  and  a  general 
shortage  in  Europe,  caused  heavy  importations  of  gold, 
so  that  the  net  loss  in  that  year  was  only  $500,000.  In 
July,  however,  large  exports  again  began.  The  banks 
finding  it  impracticable  to  furnish  the  gold  from  their 
vaults  exporters  of  gold  were  paid  in  notes,  thus  the  de- 
mand was  transferred  to  the  Treasury,  and  as  a  conse- 
quence its  gold  reserve  steadily  diminished.  In  the  seven 
months  following  June,  1892,  more  gold  was  drawn  out 
of  the  Treasury  in  redemption  of  legal  tender  notes  than 
in  the  thirteen  years  preceding. 

The  hope  that  the  purchase  of  silver  under  the  law  of  Price  of 

<->  it  1  1  ••iii  silver  not 

1 890  would  restore  that  metal  to  a  parity  with  gold  was  not  sustained, 
realized.  The  rise  in  price  to  $1.21  per  ounce  fine 
($1.2929  being  par)  was  largely  speculative  and  was 
followed  by  a  rapid  decline.  The  monometallists  experi- 
enced the  sad  satisfaction  of  having  their  predictions 
verified  ;  the  bimetallists  saw  their  arguments  against 
independent  action  proven  by  the  test  of  experience. 
The  keen  foresight  of  the  business  world  clearly  per- 
ceived the  impending  struggle  and  realized  the  baleful 
effect  upon  all  forms  of  industry  whatever  the  eventual 
result  might  be.  New  enterprises  were  abandoned, 
present  business  was  curtailed,  and  the  more  timid  pro- 
ceeded to  hide  their  talent  in  a  napkin. 


366 


CONTEST  FOR  SOUND  MONEY 


Democratic 
victory  of 
189a 


Harrison's 
views. 


Senate  for 
free  coinage. 


The  party  in  power  was  held  responsible  for  unsatis- 
factory conditions,  and  the  congressional  election  in  1890 
favored  the  Democrats,  giving  them  the  enormous  major- 
ity of  149  in  the  House.  This  spurred  the  Republicans 
in  the  remaining  short  session  (1 890-1 891)  to  endeavor 
to  pass  some  decisive  legislation  A  bill  was  reported  in 
the  Senate  providing  for  an  increased  purchase  of  silver 
under  the  law  of  1890  for  a  period  of  one  year,  in  order 
to  absorb  the  surplus  in  the  market,  which  seemed  to 
keep  down  the  price.  The  silver  Republicans,  however, 
held  the  balance  of  power,  and  uniting  with  the  silver 
Democrats  passed  a  measure  for  free  coinage  pure  and 
simple  by  a  vote  of  39  to  27.  Fifteen  Republicans 
voted  for  and  18  Democrats  against  it.  The  House 
voted  down  all  attempts  to  consider  the  bill  Windom 
died,  and  was  succeeded  by  Charles  Foster,  of  Ohio. 
The  Treasury  note-issues  continued,  and  silver  fell  to 
96  cents  per  ounce. 

Harrison,  in  pursuance  of  authority  granted  him  by 
Congress,  invited  the  principal  nations  to  join  in  an- 
other conference  to  consider  the  question  of  international 
bimetallism,  but  the  negotiations  were  not  successful 
until  1892.  Harrison  believed  that  the  scarcity  of  gold 
in  Europe  would  incline  European  nations  to  favor 
international  bimetallism,  and  hence  urged  the  accu- 
mulation of  gold  in  the  Treasury.  He  felt  satisfied 
that  we  could  maintain  parity,  expressed  sympathy 
with  the  silver  producers,  and  was  gratified  that  the 
surplus  was  not  large  and  no  longer  deposited  in 
banks. 

Notwithstanding  the  pendency  of  this  international 
conference,  those  favoring  independent  free  coinage  per- 
sisted in  their  efforts  to  force  action  in  both  branches  of 
Congress  in  the  session  of  1891-1892.  The  silver  advo- 
cates in  the  Senate  were  strongly  reenforced  by  mem- 


SILVER   CONTEST  OF  1896  367 

bers  from  the  recently  admitted  Rocky  Mountain  states, 
and  proceeded  to  pass  a  bill  for  free  coinage  at  the  ratio 
of  16  to  1  by  a  vote  of  29  to  25.  Seven  Democrats, 
including  Carlisle,  opposed  it.  The  House  rejected  the 
bill  by  a  vote  of  1 36  to  1 54,  the  negative  including  94 
Cleveland  Democrats. 

In  the  political  campaign  of  1892  the  Republican  plat-  Presidential 
form  declared  for  both  gold  and  silver  and  for  interna-  iSosT"8"  ° 
tional  bimetallism.  The  Democratic  platform,  dictated 
by  the  Cleveland  wing  of  the  party,  denounced  the  silver 
purchase  law  as  a  "cowardly  makeshift,"  demanded  that 
both  gold  and  silver  should  be  used  without  discrimina- 
tion, and  declared  in  favor  of  the  repeal  of  the  10  per 
cent  tax  on  state  bank-notes.  An  important  element, 
particularly  representatives  from  the  South,  regarded 
the  restoration  of  state  bank  circulation  as  the  best  solu- 
tion of  the  currency  question,  and  a  popular  substitute 
for  the  silver  issue  in  the  campaign. 

A  new  party  appeared  in  the  field,  composed  largely  Populist 
of  the  old  Greenback  element.  It  was  called  the  "  Peo-  party' 
pie's  Party,"  afterward  "Populists,"  and  nominated 
Weaver,  of  Iowa,  for  the  presidency.  The  declarations 
of  its  state  conventions  favored  various  "  isms,"  includ- 
ing subtreasuries  in  every  important  locality  for  the 
reception  of  wheat  and  other  farm  products,  and  the  issue 
of  paper  money  against  the  same,  in  a  manner  similar  to 
the  issuing  of  notes  against  silver  bullion  purchased. 
In  the  national  Populist  platform  gold  monometallism 
was  declared  a  "  vast  conspiracy  against  mankind."  A 
circulation  of  $50  per  capita  was  demanded.  Silver 
demonetization,  it  was  asserted,  added  to  the  purchas- 
ing power  of  gold,  and  the  national  power  to  create 
money  had  been  used  to  favor  the  bondholders.  The 
fact  that  a  candidate  appealing  for  public  support  as  the 
representative  of  such  policies  polled   1,041,000  votes, 


368 


CONTEST  FOR  SOUND  MONEY 


International 
conference 
of  1892. 


Propositions 
considered. 


and  actually  carried  four  states  and  received  one  elec- 
toral vote  in  each  of  two  other  states,  is  a  strong  com- 
mentary upon  the  vagaries  of  human  nature. 

Cleveland  was  elected  over  Harrison  with  a  Demo- 
cratic House  of  Representatives.  The  Senate  was  also 
Democratic,  with  a  majority  in  favor  of  the  free  coinage 
of  silver. 

The  international  conference  on  silver  called  by  Har- 
rison, met  in  Brussels  in  November  following  the  elec- 
tion. The  United  States  were  represented  by  Senator 
Allison  (la.),  Senator  Jones  (Nev.),  Representative 
McCreary  (Ky.),  ex-Comptroller  of  the  Currency  H.  W. 
Cannon,  Prof.  E.  B.  Andrews  of  Brown  University, 
and  E.  H.  Terrell,  United  States  Minister  to  Belgium. 
Twenty  countries  were  represented,  one  of  Great  Britain's 
delegates  being  a  member  of  the  banking-house  of 
Rothschild. 

The  delegates  from  the  United  States  were  instructed 
to  endeavor  to  secure  international  bimetallism  or,  fail- 
ing in  that,  action  tending  to  a  largely  increased  mone- 
tary use  of  silver,  to  arrest  depreciation.  They  soon 
found  the  former  proposition  to  be  out  of  the  question. 
The  European  banks  at  this  time  were  very  strong  in 
gold,  that  of  England  alone  excepted.  On  the  other 
hand,  the  United  States  had  been  steadily  losing  gold, 
and  its  Treasury  reserve  was  down  to  $114,000,000. 
Our  delegates,  in  their  memorandum  submitted  to  the 
conference,  included  the  proposition  for  unrestricted 
coinage  by  all  commercial  nations  of  gold  and  silver 
into  full  legal  tender  coins  at  a  fixed  ratio.  They  pre- 
ceded it,  however,  by  two  other  propositions  looking 
to  the  increased  use  of  silver  upon  other  plans  as  more 
likely  of  adoption.  A  sentiment  favorable  to  an  in- 
creased use  of  silver  was  manifest,  but  no  practical 
method  could  be  agreed  upon.     Subordinate  features, 


SILVER   CONTEST  OF  1896  369 

such  as  the  discontinuance  of  the  use  of  small  gold 
coins  and  notes  of  small  denominations,  were  discussed. 
France  would  not  support  any  measure  which  would 
increase  its  stock  of  silver.  Great  Britain,  manifestly 
concerned  chiefly  on  account  of  India,  seemed  anxious 
that  the  price  of  silver  be  kept  steady,  but  evidently 
did  not  intend  to  change  her  monetary  system.  The  Adjourns 
conference  adjourned  in  January  until  May,  1893,  and  action! 
again  to  November,   1893,  but  never  reassembled. 

The  United  States  were  ably  represented  at  this  Comments 
conference  by  men  schooled  in  economics  and  pos-  ference00"" 
sessed  of  practical  experience  as  well.  The  subject 
was  exhaustively  discussed  and  thoroughly  considered. 
Of  course  their  efforts  in  favor  of  international  bimet- 
allism were  largely  compromised  and  nullified  by  the 
determined  and  persistent  effort  in  Congress  to  force 
independent  action  in  favor  of  free  coinage  at  a  ratio 
differing  from  that  obtaining  in  Europe.  The  Euro- 
pean delegates  naturally  regarded  the  formal  action 
of  Congress  as  more  representative  of  public  senti- 
ment, and  a  better  indication  of  probable  action  on  the 
part  of  the  United  States,  than  any  presentation  which 
our  delegates  were  able  to  make.  As  negotiators  in  the 
interest  of  silver  their  power  was  impaired  by  the 
fatuous  zeal  of  silver  advocates  at  home.  It  should 
be  stated  in  explanation  that  the  most  ardent  advocates 
of  free  silver  regarded  the  conference  as  a  means  de- 
vised to  postpone  the  accomplishment  of  their  purpose 
and  enable  the  party  in  power  to  hold  the  support  of 
the  silver  Republicans  in  the  pending  presidential 
campaign. 

Although  barren  of  affirmative  results  the  conference  Bimetallism 
was  productive  of  the  greatest  good.    It  served  to  concen- 
trate the  thought  and  the  study  of  all  nations  upon  this 
question,  and  its  failure  to  reach  any  agreement  convinced 


37o 


CONTEST  FOR  SOUND  MONEY 


Movement 
for  state 
bank-notes. 


Hepburn's 
state  bank 
statistics. 


all  that  the  relative  value  of  silver  and  gold,  in  the  future 
as  in  the  past,  would  be  determined  by  the  laws  of 
trade  and  not  by  international  agreement.  It  demon- 
strated the  impossibility  of  international  bimetallism. 
The  leading  European  nations  were  quite  satisfied  with 
the  gold  standard  and  in  no  mood  for  monetary  experi- 
ments apparently  in  the  interest  of  commercial  rivals. 
The  settled  judgment  in  favor  of  the  single  gold  standard 
and  the  firm  determination  on  the  part  of  the  leading 
European  nations  to  adhere  to  the  same  was  clearly 
apparent.  That  the  question  of  a  single  gold  standard 
or  a  single  silver  standard  was  the  leading  issue  to  be 
fought  out  in  the  United  States  was  equally  apparent. 
With  all  thinking  men  bimetallism  was  impossible.  The 
question  was,  silver  or  gold. 

In  the  presidential  contest  of  1892  the  Democratic 
platform  favored  the  repeal  of  the  prohibitive  tax  on 
state  bank  circulation.  The  Democrats  elected  their 
President,  and  controlled  Congress.  Their  candidates, 
and  presumably  their  platform,  had  been  indorsed  at 
the  polls.  A  serious  attempt  to  restore  state  bank  cir- 
culation was  anticipated.  It  was  known  that  the  incom- 
ing administration  would  exert  its  influence  to  secure 
the  repeal  of  the  Silver  Purchase  Law,  and  it  was  feared 
that  the  restoration  of  state  bank  circulation  might  be 
necessary  in  order  to  command  the  support  of  the  repre- 
sentatives from  the  South.  Comptroller  Hepburn,  in 
his  report,  presented  the  objections  to  such  a  policy,  and 
reviewed  the  history  of  state  banks  and  state  bank  cir- 
culation in  contrast  with  the  existing  national  system, 
showing  from  statistics  the  saving  in  exchange,  the 
greater  economy,  greater  safety,  and  general  superiority 
of  the  national  system.  He  also  urged  that  greater 
elasticity  be  given  the  national  bank  currency  by  remov- 
ing the  limitations  upon  the  retirement  and  reissue  of 


SILVER   CONTEST  OF  1896  371 

circulation.  He  also  elaborated  and  recommended  a 
plan  for  the  refunding  of  the  presently  maturing  gov- 
ernment bonds  into  a  long-time,  low-rate  bond.  This 
would  result  in  the  saving  of  interest  to  the  government 
and  at  the  same  time  furnish  a  more  desirable  basis  for 
note-issues.  Such  a  measure  was  eventually  embodied 
in  the  refunding  act  of  March  14,  1900. 

The  condition  of  the  Treasury  upon  the  eve  of  the  Deplorable 
change  in  administration  (March  4,  1893)  was  far  from  0f  Treasury, 
satisfactory.  The  cash  balance  available  for  current 
payments  was  about  $24,000,000.  The  gold  reserve 
was  maintained  above  $100,000,000,  which  had  come  to 
be  regarded  the  danger  line,  only  by  extraordinary 
efforts,  the  Treasury  obtaining  gold  from  the  banks  in 
exchange  for  other  forms  of  currency.  The  condition 
of  the  Treasury  which  confronted  President  Cleveland 
upon  resuming  office  was  in  sharp  contrast  with  the 
$196,245,980  gold  reserve  and  $70,158,461  other  avail- 
able cash  balance  which  he  left  upon  retiring  from  office 
in  March,  1889.  His  administration  was  embarrassed 
for  want  of  funds  to  meet  current  expenses  without 
trenching  on  the  gold  reserve  necessarily  maintained 
to  insure  the  redemption  of  legal  tender  notes  upon 
presentation.  There  was  another  circumstance  which 
tended  still  further  to  reduce  the  lessening  revenues. 
The  Democrats  favored  a  revision  of  the  tariff,  a  policy 
to  which  Cleveland  was  pledged.  Business  interests 
affected  by  customs  laws  naturally  halted,  pending 
action  by  Congress.  Manufacturing  diminished  mate- 
rially, labor  was  unemployed,  consumption  was  re- 
duced, and  the  government's  income  necessarily  fell 
off. 

Carlisle,  who  had  been  an  ardent  advocate  of  the  free  Gold  reserve 
coinage  of  silver,  became  Secretary  of  the  Treasury. 
But  for  the  well-known  attitude  of  President  Cleveland 


372  CONTEST  FOR  SOUND  MONEY 

on  the  money  question,  Carlisle's  selection  might  have 
occasioned  uneasiness.  The  gold  exports  continued,  and 
the  reserve,  for  a  while  maintained  by  exchanging  other 
funds  for  gold  with  the  banks,  in  April  fell  below  the 
$100,000,000  mark.  The  administration  had  not  up  to 
this  time  had  occasion  to  clearly  define  its  policy  respect- 
ing the  Treasury  notes  of  1890,  which  were  by  their 
terms  redeemable  in  coin,  and  hence,  if  the  government 
chose,  in  silver  dollars.  Considerable  alarm  had  been 
caused  by  the  reported  decision  of  Carlisle  to  redeem 
these  notes  in  silver,  hence  Cleveland  declared  his  pur- 
pose to  redeem  them  in  gold  and  to  exercise  all  the 
powers  of  his  great  office  for  the  maintenance  of  gold 
payments.  Fear  of  a  silver  basis,  however,  prevailed, 
especially  abroad,  owing  to  the  weakness  of  the  Treas- 
ury, and  every  express  steamer  brought  in  American 
securities  and  took  away  gold.  The  net  loss  during  the 
fiscal  year  1893  amounted  to  $87,500,000. 

The  crisis  which  resulted  was  severe  and  its  effects 
enduring.  Fear  of  going  upon  a  silver  basis  roused  the 
banking  and  business  interests  to  united  action.  Within 
the  period  of  six  weeks  in  midsummer  the  banks,  at 
great  expense,  and  notwithstanding  adverse  exchange 
conditions,  imported  $50,000,000  of  gold.  The  usual 
form  of  transaction  was  to  purchase  the  gold  to  arrive, 
with  clearing-house  funds,  the  premium  ranging  from 
1  to  3  per  cent. 
Extra  session  President  Cleveland  convened  Congress  in  extra  ses- 
sion in  August.  In  his  message  the  disturbed  condition 
of  business  was  attributed  to  the  silver  law  of  1890,  and 
its  repeal  strongly  recommended.  He  pointed  out  that 
in  three  years  the  Treasury  had  lost  $132,000,000  of  gold 
and  gained  $147,000,000  of  silver.  If  this  continued, 
all  its  funds  would  soon  be  in  silver,  and  the  mainten- 
ance of  parity  between  silver  and  gold  impossible.     The 


of  Congress. 


SILVER    CONTEST  OF  1896  373 

government  had  no  right  to  impose  upon  the  people  a 
depreciated  currency  nor  to  experiment  with  currency 
plans  rejected  by  the  leading  civilized  nations. 

He  experienced  great  difficulty  in  inducing  his  own 
party  to  sustain  him.  After  a  long  struggle,  terminat- 
ing November  1,  with  the  aid  of  Republican  votes  in 
the  Senate,  the  silver  purchasing  section  of  the  law  of 
1890  was  repealed.  Amendments  proposing  free  coin- 
age at  various  ratios  and  the  restoration  of  the  act  of 
1878  were  defeated.  In  the  Senate  the  vote  was  43  to 
32,  only  20  Democrats  favoring  the  repeal  and  9  Re- 
publicans opposing.  In  the  House  the  vote  stood  239 
to  109,  only  22  Republicans  voting  in  the  affirmative. 
This  repealing  act  declared  it  to  be  the  policy  of  the 
United  States  to  maintain  parity  of  its  gold  and  silver 
coins  by  international  agreement  or  otherwise. 

The  discontinuance  of  silver  purchases  after  such  a  Purchase  of 
protracted  struggle  did  not  restore  confidence.  It  was  ^Id. 
manifestly  not  the  sole  cause  of  the  troubles.  Nor  did 
those  in  Congress,  who  favored  "  more  money "  and 
were  in  the  majority,  desist  from  urging  the  free  coin- 
age of  silver,  increased  greenback  issues,  repeal  of  the 
tax  on  state  bank-notes,  and  other  measures  calculated 
to  unsettle  public  confidence.  A  general  feeling  of 
uneasiness  pervaded  the  country.  Interior  banks  had 
over  $200,000,000  of  reserve  deposits  in  New  York.  As 
the  Treasury  reserve  gradually  diminished,  they  became 
impressed  with  a  desire  to  strengthen  their  position  at 
home,  and  the  withdrawal  of  a  large  portion  of  their 
New  York  deposits  followed.  This  in  turn  necessitated 
curtailing  and  calling  loans,  and  general  liquidation 
ensued.  Reserves  of  the  New  York  banks  fell  below 
the  legal  requirement.  Money  on  call  rose  at  one  time 
to  74  per  cent.  Time  loans  to  other  than  regular  cus- 
tomers of  the  banks  were  exceedingly  difficult  to  obtain. 


374 


CONTEST  FOR  SOUND  MONEY 


During  the  crisis,  money  was  hoarded,  and  despite  the 
great  supply  (nearly  $24  per  capita)  a  currency  "famine" 
ensued,  and  premiums  as  high  as  4  per  cent  were  paid 
for  currency  of  any  kind,  even  silver  dollars.  The  banks 
in  the  principal  Eastern  cities  were  compelled  to  curtail 
cash  payments.  The  use  of  clearing-house  loan  certifi- 
cates in  large  amounts  was  resorted  to  throughout  the 
country  as  well  as  various  other  forms  of  obligations 
designed  to  perform  the  functions  of  currency. 

Shortly  after  the  panic  or  currency  famine  of  1893, 
by  means  of  extensive  correspondence  with  every  con- 
siderable place  in  the  country,  I  obtained  statistics 
which  justify  the  estimate  that  there  was  issued  fully 
$100,000,000  of  clearing-house  certificates  used  in  set- 
tlement between  banks,  of  certified  checks,  certificates 
of  deposit,  cashier's  checks  in  round  amounts  (as  $1, 
$5,  $10,  $20,  and  $$0),  due  bills  from  manufactur- 
ers and  other  employers  of  labor,  and  clearing-house 
certificates,  in  round  amounts  (in  the  case  of  Birming- 
ham, Ala.,  as  small  in  amount  as  25  cents),  all  de- 
signed to  take  the  place  of  currency  in  the  hands  of 
the  public.  Clearing-house  certificates,  issued  and  used 
in  settling  debit  balances  between  banks,  were  in  no 
wise  prohibited,  but  all  of  the  other  above-described 
evidences  of  debt  which  were  issued  to  circulate  among 
the  public  as  money,  were  clearly  subject  to  the  10  per 
cent  tax  enacted  for  the  purpose  of  getting  rid  of  state 
bank  circulation.  This  temporary  currency,  however, 
performed  so  valuable  a  service  in  such  a  crucial  period, 
in  moving  the  crops  and  keeping  business  machinery  in 
motion,  that  the  government,  after  due  deliberation, 
wisely  forbore  to  prosecute.  In  other  words,  the  want 
of  elasticity  in  our  currency  system  was  thus  partially 
supplied.  It  is  worthy  of  note  that  no  loss  resulted 
from  the  use  of  this  makeshift  currency. 


SILVER   CONTEST  OF  1896 


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376 


CONTEST  FOR  SOUND  MONEY 


The  Clearing-house  Association  of  New  York,  in 
1893,  issued  their  first  certificates  June  21,  their  last 
September  6.  All  certificates  were  finally  retired  No- 
vember 1.  The  total  amount  issued  was  $41,490,000. 
The  maximum  outstanding  at  any  one  time  was 
$38,280,000.  The  rate  of  interest  paid  thereon  by  the 
banks  to  the  Clearing-house  Association  was  6  per 
cent.  The  Philadelphia  Clearing-house  Association 
issued  $11,465,000,  and  that  of  Baltimore  $1,475,000  in 
certificates,  practically  coincident  with  the  New  York 
issue  as  to  time,  and  similar  as  to  conditions.  The  Bos- 
ton banks  issued  $11,695,000,  bearing  interest  at  7-^ 
per  cent;  the  first  issue  bore  date  of  June  27,  and  the 
final  retirement  was  October  20.  The  aggregate  maxi- 
mum amount  issued  in  these  four  cities  was  $66,125,000. 
Since  this  is  the  last  instance  of  the  issue  of  clearing- 
house loan  certificates  in  the  United  States,  I  think  it 
may  be  of  interest  to  insert  (p.  375)  a  table  giving  com- 
plete and  exact  data  as  to  all  issues  of  loan  certificates 
made  by  the  New  York  Clearing-house. 

As  heretofore  stated,  this  currency  famine  caused  a 
forced  importation  of  about  $50,000,000  of  gold  in  the 
face  of  adverse  exchange  rates  and  hence  at  a  premium. 
By  means  of  borrowed  bonds  national  bank  circulation 
was  increased.  The  process,  however,  was  slow,  and  the 
worst  of  the  stringency  was  over  before  the  time  re- 
quired in  which  to  procure  notes  from  the  Treasury 
had  elapsed.  The  scarcity  of  currency  forbade  dis- 
crimination, and  the  gold  imported  found  its  way  largely 
into  the  Treasury  and  served  materially  to  strengthen 
the  reserve. 

Commercial  agencies  reported  the  suspension  of  1 5,000 
individuals  and  concerns  with  liabilities  aggregating 
$347,000,000.  One  hundred  and  fifty-eight  national 
banks  and  425  other  banks  and  trust  companies,  largely 


SILVER   CONTEST  OF  1896  377 

located  in  the  South  and  West,  suspended.  Eighty-six 
of  the  national  banks  and  many  of  the  others  subse- 
quently resumed.  Clearing-house  exchanges  for  the 
year  showed  a  falling  off  of  $13,800,000,000,  of  which 
74  per  cent  was  in  the  city  of  New  York.  Savings 
bank  deposits  were  reduced  $36,000,000,  the  resources 
of  national  banks  diminished  $350,000,000,  and  those  of 
state  banks  $53,000,000. 

It  had  become  apparent  that  the  international  confer- 
ence on  silver  would  not  reassemble.  The  British  gov- 
ernment had,  therefore,  closed  the  mints  of  India  to  the 
free  coinage  of  silver,  and  endeavored  to  maintain  a  fixed 
par  of  exchange  between  the  mother  country  and  the 
dependency.  Silver  fell  to  78  cents  per  ounce,  giving  a 
ratio  to  gold  of  26|  to  1.  This  further  depression  of  the 
price  of  silver  added  materially  to  the  difficulties  and 
embarrassments  of  the  United  States  Treasury  in  its 
struggle  for  the  maintenance  of  the  gold  standard. 
As  marking  the  trend  of  thought  and  events  in  the 
world  it  undoubtedly  confirmed  and  strengthened  the 
advocates  of  the  gold  standard. 

The  usual  result  followed  this  money  stringency.  Cur- 
rency in  hiding  came  into  circulation,  business  stagna- 
tion lessened  the  demand,  and  a  plethora  ensued.  The 
expenditures  of  the  Treasury  exceeded  its  receipts  at  the 
rate  of  $7,000,000  monthly.  The  Treasury  was  obliged 
to  use  the  gold,  which  it  had  accumulated  as  a  reserve, 
to  meet  its  current  expenses. 

Carlisle,  in  his  report  to  Congress,  asked  for  authority  Treasury 
to  make  temporary  loans  to  cover  revenue  deficits  and 
also  for  specific  authority  to  issue  bonds  for  gold  for  the 
purpose  of  increasing  the  gold  reserve.  He  urged  that 
so  long  as  the  Treasury  was  charged  with  the  functions 
of  a  bank  of  issue,  ample  provision  for  the  redemption 
of  its  notes  should  be  made.     Congress  disregarded  his 


378 


CONTEST  FOR  SOUND  MONEY 


Bonds  issued 
to  obtain 
gold. 


Carlisle  on 
bond  issue. 


recommendation.  In  January,  1894,  the  gold  reserve 
fell  below  $  66,000,000,  and  there  was  but  $18,000,000 
other  available  cash.  He  was  therefore  compelled  to 
exercise  the  authority  granted  by  the  Resumption  Act 
of  1875,  and  determined  to  issue  ten-year  five  per  cent 
bonds,  as  authorized  by  the  Refunding  Act  of  1870,  to 
the  amount  of  $50,000,000. 

He  proceeded  without  consultation  with  the  leading 
bankers  of  the  country,  and  especially  avoided  New  York. 
He  endeavored  to  float  the  loan  by  popular  subscriptions, 
and  appealed  to  the  country  at  large  for  that  purpose. 
The  attempt  was  unsuccessful.  He  then  came  to  New 
York,  convened  the  leading  bankers  at  the  subtreasury 
and  announced  that  less  than  $5,000,000  subscriptions 
had  been  received.  He  said  to  the  bankers  present  in  sub- 
stance :  Unless  you  take  this  loan,  it  will  be  a  failure. 
Just  what  effect  its  failure  will  have  upon  the  business 
interests  which  you  represent,  you,  gentlemen,  are 
better  able  to  judge  than  I  am.  What  the  political 
effect  will  be  I  can  perhaps  better  judge  than  you.  All 
business  interests  and  all  classes  of  people  are  suffering, 
and  have  been  for  many  months.  The  silver  purchasing 
provision  of  the  law  of  1890  was  denounced  as  the  cause, 
and  its  repeal  advocated  as  a  remedy.  You,  gentlemen, 
joined  if  you  did  not  lead  in  this  sentiment.  The  Presi- 
dent convened  Congress,  the  law  was  repealed  — 
not  promptly,  as  it  should  have  been,  but  it  was  repealed, 
nevertheless.  The  troubles  seemed  to  continue  without 
abatement.  Then  it  was  proclaimed  that  the  gold  re- 
serve was  impaired,  hence  the  credit  of  the  government 
endangered,  and  must  be  restored  in  order  to  restore 
confidence  and  credit  generally,  and  bonds  should  be 
issued  for  that  purpose.  Well,  we  offer  you  the  bonds. 
If  you  take  them  and  give  the  government  gold,  I  think 
the  situation  will  be  relieved.     If  you  refuse,  the  bond 


SILVER   CONTEST  OF  1896  379 

issue  is  a  failure.  In  that  case,  I  think  an  act  to  coin 
the  seigniorage  in  the  Treasury  or  issue  silver  certificates 
against  the  same  will  pass  both  houses  of  Congress  al- 
most immediately.  The  friends  of  silver  will  then  say 
to  the  President :  "  You  have  tried  Wall  Street's  remedy 
twice,  and  each  time  it  has  failed.  Now  try  ours." 
Under  the  circumstances  I  very  much  fear  that  the 
President  in  his  poverty  will  be  compelled  to  sign  such 
a  bill.  If  this  bond  issue  is  taken,  the  situation  will  be 
relieved,  and  should  a  bill  to  coin  the  seigniorage  reach 
the  President,  he  will  certainly  veto  it. 

John  A.  Stewart  replied:  "Of  course  we  will  take  the  New  York 

ttikcs  tlic 

loan.  We  have  known  all  along  that  in  the  end  you  bonds, 
would  have  to  come  to  us ;  we  have  anticipated  this  in- 
terview, and  are  prepared  to  take  the  loan."  The  loan 
was  promptly  taken.  A  substantial  amount  of  gold 
came  into  the  Treasury  from  the  vaults  of  the  banks. 
A  portion,  however,  was  furnished  by  withdrawal 
from  the  Treasury  for  that  purpose  by  means  of  green- 
backs. This  in  no  wise  interfered  with  the  success  of 
the  loan,  as  the  government's  stock  of  cash  was  so  low 
that  it  was  obliged  to  pay  out  gold  for  current  purposes. 

The  Secretary's  power  to  issue  bonds  was  questioned  Legality  of 
in  Congress,  and  a  resolution  was  introduced  to  prohibit  questioned, 
the  payment  of  interest  on  the  bonds  sold.     A  labor  or- 
ganization attacked  the  Secretary's  authority  in  a  legal 
proceeding  in  the  federal  courts,  which,  however,  ruled 
in  his  favor. 

Carlisle  was  severely  criticised  in  some  quarters  for  not 
resorting  to  bond  issues  at  an  earlier  period,  in  order  to 
protect  his  reserves  and  prevent  a  general  feeling  of 
distrust  from  taking  possession  of  the  country.  Senti- 
ment or  fear  is  an  important  element  in  every  financial 
crisis,  but  the  success  of  the  Secretary's  policy  depended 
upon  public  support,  and  perhaps  the  delay  in  issuing 


38o 


CONTEST  FOR  SOUND  MONEY 


Tariff 
Legislation 


bonds  was  necessary,  in  order  that  the  people  as  a  whole 
might  realize  the  danger  so  apparent  to  statesmen 
and  financiers  and  justify  the  remedy.  The  continu- 
ance of  distrust  is  amply  evidenced  by  the  fact  that  by 
the  first  of  September  $75,000,000  of  gold  had  been 
exported,  and  the  gold  reserve  was  down  to  $55,000,000. 
The  silver  bullion  purchased  under  the  act  of  1890 
had  cost  $156,000,000.  The  average  cost  per  ounce 
"Coining the  was  92.5  cents.  This  bullion  would  produce  when 
seigniorage.  cometj  2 1 8,000,000  silver  dollars,  yielding  a  seigniorage 
or  profit  between  cost  and  coinage  value  of  about 
$62,000,000.  A  part  of  this  bullion  had  already  been 
coined,  so  that  the  remainder  would  produce  a  seignior- 
age of  about  $55,000,000.  Congress  proposed  to  antici- 
pate the  coinage  of  this  bullion,  regard  the  last-mentioned 
sum  as  already  coined,  and  direct  the  issue  of  silver 
certificates  to  that  amount.  This  ingenious  inflation 
measure  is  the  one  alluded  to  by  Carlisle  in  his  interview 
with  the  New  York  bankers.  It  passed  in  April,  but 
Cleveland,  after  some  deliberation,  during  which  earnest 
protests  were  poured  in  upon  him,  vetoed  it. 

This  Congress  repealed  the  law  of  1862  and  later 
ones  exempting  the  United  States  notes  and  certifi- 
cates circulating  as  money  from  taxation.  A  law  was 
passed  reducing  tariff  rates  generally,  but  designed  to 
provide  for  a  larger  revenue  from  sugar  and  other  arti- 
cles. It  failed  to  produce  any  material  increase  of  rev- 
enue immediately,  owing,  very  likely,  to  the  depressed 
condition  of  trade  and  industry.  The  business  troubles 
were  in  large  part  due  to  the  fact  that  the  government's 
income  did  not  equal  its  expenditure,  and  Congress  is 
properly  held  responsible  for  failure  to  give  the  country 
a  measure  that  would  produce  sufficient  revenue  to  meet 
the  ordinary  expenditure  of  government. 

In  November  a  further  issue  of    $50,000,000  5  per 


SILVER   CONTEST  OF  1896  381 

cent  bonds  under  the  authority  of  the  Resumption  Act  Carlisle  sells 
became  necessary.  Carlisle,  in  his  report,  urged  the  more  on  s* 
retirement  of  the  greenbacks,  and  among  other  things 
formulated  an  elaborate  currency  scheme,  whose  prin- 
cipal features  were  the  impounding  in  the  Treasury 
of  legal  tender  notes  as  part  security  for  national  bank- 
notes and  permitting  state  banks  to  issue  notes  under 
certain  restrictions.  The  monthly  inflation  of  the  cur- 
rency by  the  purchase  of  silver  bullion  having  ceased, 
the  time  seemed  propitious  for  improving  and  popu- 
larizing the  national  bank  circulation.  The  American 
Bankers'  Association,  meeting  in  Baltimore  in  1894, 
developed  a  bank-note  issue  system,  afterward  known  as 
the  Baltimore  plan.  It  proposed  to  permit  note-issues  Baltimore 
under  federal  supervision  to  the  extent  of  50  per  cent  of  p]an/ 
the  paid-up,  unimpaired  capital  of  banks,  subject  to  \ 
per  cent  taxation,  and  an  additional  note-issue  equal 
to  25  per  cent  of  the  capital,  subject  to  a  much  heavier 
tax  in  order  to  insure  its  retirement  when  the  neces- 
sity for  its  issue  had  disappeared.  The  notes  were  to 
be  a  first  lien  upon  the  assets  of  the  bank  (including 
the  double  liability  of  shareholders),  and  a  5  per  cent 
guarantee  fund  (in  addition  to  the  5  per  cent  redemp- 
tion fund)  was  to  be  provided  and  maintained  for  the 
redemption  of  notes  of  failed  banks,  this  fund  to  be 
replenished,  if  need  be,  by  enforcing  the  prior  lien.  The 
silver  sentiment  of  the  country  was  so  strong,  however, 
that  no  currency  scheme,  however  well  devised,  could 
obtain  a  hearing. 

The  House  of   Representatives  elected  in  1894  was 
strongly  Republican,  and  that  party  also  regained  control 
of  the  Senate.     President  Cleveland,  who  had  vigorously  Cleveland  on 
supported  the  recommendations  of  Secretary  Carlisle  on    ega 
the  subject  of  the  gold  reserve  and  legal  tender  notes, 
sent  a  special  message  to  Congress  on  January  9,  1895, 


382  CONTEST  FOR  SOUND  MONEY 

asking  for  authority  to  issue  a  3  per  cent  fifty-year  gold 
bond,  the  proceeds  to  be  used  to  retire  and  cancel 
the  legal  tender  notes.  He  believed  that  the  time  had 
come  when  the  Treasury  should  be  relieved  from  the 
"  humiliating  process  of  issuing  bonds  to  procure  gold 
to  be  immediately  drawn  for  purposes  not  related  to 
the  benefit  of  the  government  or  our  people."  Over 
$300,000,000  notes  had  been  redeemed  in  gold,  yet  they 
were  all  in  existence  and  mainly  in  circulation.  More 
than  $172,000,000  gold  had  been  paid  out  by  the  Treas- 
ury in  redemption  of  notes  during  the  year. 

More  bond  One  month  later,  Congress  having  failed  to  act,  and 

the  continuing  exports  having  reduced  the  gold  reserve 
to  less  than  $42,000,000,  Cleveland  informed  Congress 
that,  in  order  to  maintain  gold  payments,  he  had  been 
compelled  to  authorize  a  special  contract  (with  a  syndi- 
cate) to  procure  gold  under  the  old  law  of  1862  (re- 
ferred to  ante,  p.  189)  continued  as  section  3700  of  the 
Revised  Statutes.  The  contract  called  for  the  pur- 
chase of  gold  to  the  value  of  $65,116,244,  by  the  sale 
of  $62,315,400  4  per  cent,  thirty-year  coin  bonds  at 
104.496.  If,  however,  Congress  would  authorize  a  3  per 
cent  gold  bond,  the  same  would  be  taken  at  par  and 
result  in  an  ultimate  saving  of  over  $16,000,000. 
Inasmuch  as  the  coin  bonds  would  doubtless  be  paid 
in  gold  at  maturity,  such  legislation  should  be  promptly 
passed,  in  order  that  the  above-mentioned  sum  might 
be  saved.  Congress  refused  by  a  vote  of  120  to 
167  to  grant  the  authority  asked  for,  and  the  more 
expensive  course  had  to  be  adopted.  Four  per  cent 
bonds  issued  in  1877  nacl  but  recently  been  quoted 
at  129. 

The  Morgan       Under  this  contract  the  syndicate  not  only  undertook 

syndicate.  -         ,  . 

to  furnish  the  gold,  but  to  take  none  from  the  Treasury 
with  United  States  notes,  to  actually  import  one-half  of 


SILVER   CONTEST  OF  1896  383 

the  sum  contracted  for,  and  to  do  all  in  its  power  to  pre- 
vent exports  of  gold  during  the  period  of  the  contract. 
The  importation  of  so  much  gold  necessarily  implied  the 
lapse  of  a  very  considerable  period  of  time.  Obviously 
these  conditions  were  of  the  greatest  importance  to  the 
Treasury  under  the  circumstances.  The  syndicate,  which 
included  the  Rothschilds,  was  managed  by  J.  P.  Morgan. 
By  the  establishment  of  a  large  credit  abroad,  and  by  a 
combination  of  all  foreign  exchange  houses  on  this  side, 
it  was  able  to  carry  out  the  undertaking.  The  syndi- 
cate, indeed,  furnished  over  $16,000,000  more  gold  than 
their  contract  called  for  by  exchanging  the  same  with 
the  Treasury  for  other  forms  of  money. 

The  action  of  the  administration  received  the  severest 
criticism  in  Congress,  especially  from  its  own  party.  A 
committee  was  appointed  by  the  Senate  to  investigate 
the  subject,  upon  the  allegation  of  irregularities,  but  the 
result  was  unimportant  except  as  it  furnished  a  basis 
for  political  speeches.  The  business  interests  of  the 
country,  on  the  other  hand,  applauded  the  measure  as 
sound  and  imperatively  necessary.  The  drain  of  gold 
ceased  at  once,  and  by  the  end  of  February  the  reserve 
stood  at  $84,000,000  and  in  June  had  increased  to 
$107,500,000.  The  tide  turned,  however,  and  by  Janu- 
ary 1,  1896,  the  gold  reserve  had  reached  the  very  low 
point  of  $50,000,000. 

Carlisle  met  the  situation  promptly,  and  sold  in  the  Fourth  bond 
ordinary  way  $100,000,000  thirty-year  4  per  cent  coin 
bonds.  The  aggregate  bids  for  the  same  amounted  to 
over  $568,000,000,  and  the  loan  was  placed  at  m|. 
The  net  loss  of  gold  by  export  in  the  fiscal  year  1894 
was  over  $4,500,000,  in  1895  $31,000,000,  and  in  1896 
$80,500,000.  The  gold  production  of  the  world,  espe- 
cially in  the  United  States,  showed  a  marked  increase 
in   1 89 1,  and  continued  to  increase  steadily  from  year 


384  CONTEST  FOR  SOUND  MONEY 

to  year.  Coincident  therewith  the  trend  of  sentiment 
throughout  the  world  was  strongly  toward  the  gold 
standard.  Austria  and  Russia  had  adopted  this  policy 
and  were  actively  accumulating  gold. 

In  his  report  for  1895,  Carlisle  showed  a  continuing 
deficit  in  revenue,  but  a  growing  cash  balance  from  the 
sale  of  bonds.  He  ably  defended  his  policy  to  restore 
the  nation's  credit,  which  had  been  seriously  undermined 
by  long  adherence  to  a  false  monetary  system.  He 
urged  Congress  (Republican  in  both  branches)  to  pro- 
vide for  the  cancellation  of  the  legal  tender  notes.  He 
also  recommended  the  authorization  of  branch  banks  to 
supply  the  smaller  towns  with  facilities  not  obtainable 
under  the  national  bank  act.  Cleveland  forcibly  urged 
that  the  government  notes  should  be  funded  into  bonds, 
not  only  to  avoid  further  expense  to  procure  gold,  but, 
much  more,  to  save  the  cost  to  the  people  of  periodic  crises. 

The  report  of  Comptroller  Eckels  reflected  the  gen- 
erally unsatisfactory  condition  of  business  throughout  the 
country.  The  number  of  national  banks  had  increased 
only  sixty-nine  in  the  two  years  1894  and  1895.  Their 
circulation  in  October,  1895,  as  in  1893,  amounted  to 
$182,000,000.  His  report  of  1894  contained  a  most 
valuable  abstract  of  the  banking  systems  under  state 
laws  and  of  foreign  countries.  In  1895  he  presented  a 
report  on  the  use  of  credit  instruments  in  retail  trans- 
actions, and  one  giving  the  number  of  depositors  in 
national  banks  classified  by  their  average  deposits. 

The  per  capita  circulation  in  July,  1895,  was  $22.93, 
and  one  year  later  $21.10.  The  supply,  however,  was 
more  than  equal  to  the  demand.  Every  bond  issue 
had  involved  a  money  stringency  of  greater  or  less  de- 
gree followed  by  the  usual  plethora.  The  change  in  the 
tariff  law  had  had  an  unsettling  effect,  and  the  business 
of  the  country  generally  was  most   unsatisfactory  be- 


SILVER   CONTEST  OF  1896  385 

cause  of  the  absence  of  stable  conditions  which  would 
enable  business  men  to  forecast  future  results  with  a 
reasonable  degree  of  certainty.  The  lessening  per 
capita  circulation,  lower  prices,  and  hard  times  produced 
a  condition  of  mind  throughout  the  country  peculiarly 
favorable  for  the  campaign  of  the  silver  propaganda. 
The  movement  in  favor  of  free  coinage,  managed  by 
skilful  leaders  with  ample  means  at  their  command, 
spread  rapidly.  Pamphlets,  books,  speeches,  and  news- 
papers favoring  that  policy  were  distributed  plentifully. 
Every  phase  of  the  question  was  discussed  with  con- 
summate ability,  and  with  arguments  well  calculated  to 
impress  the  public. 

European   bimetallists  were  also  exceedingly  active.  Bimetallism 

.  .  abroad. 

In  both  Germany  and  England,  where  the  opposition 
had  been  strongest,  opinion  had  apparently  altered  to 
such  an  extent  that  the  outlook  for  an  international 
agreement  was  considered  favorable.  Before  adjourn- 
ing in  March,  1895,  Congress  had  appointed  three 
members  of  each  house  a  delegation  to  confer  with 
European  representatives.  The  agitation  for  indepen- 
dent action  by  the  United  States  became  so  strong  that 
the  "  internationalists  "  soon  became  convinced  that  the 
question  would  have  to  be  determined  at  the  polls. 
Local  conventions  of  the  Populists,  more  numerously 
attended  than  ever  before,  declared  unequivocally  for 
independent  action  and  liberation  of  the  people  from 
the  alleged  slavery  to  the  "  money  power."  The  con- 
duct of  the  Treasury,  the  redemption  of  notes  in  gold 
alone  when  the  silver  dollar  was  also  full  tender,  the  bond  Silver  issue 

....  in  politics. 

sales  to  buy  gold,  and  the  ranging  of  the  entire  banking 
community  against  free  coinage,  were  especially  de- 
nounced. Never  before  was  the  country  roused  to  such 
a  degree  of  excitement  by  an  economic  question. 

Republican  conventions  in   the  Western  states   also 


386  CONTEST  FOR  SOUND  MONEY 

leaned  toward  silver,  but  the  national  convention  op- 
posed free  coinage,  except  under  international  agree- 
ment, and  gold  was,  after  much  discussion,  indorsed 
as  the  standard  of  value.  Their  candidate,  McKinley, 
was  equally  cautious  and  hesitating  in  the  early  portion 
of  the  campaign. 

The  Democratic  national  convention  was  controlled  by 
the  anti-Cleveland  wing  of  the  party,  which  was  pre- 
pared to  coalesce  with  the  Populists.  Its  platform 
favored  free  coinage  of  silver.  The  logical  nominee, 
Bland,  was  passed  by  because  it  was  feared  he  could  not 
Bryan's  can-  rally  the  full  support  of  the  radical  Populists.  Bryan 
was  nominated.  The  Populists  also  nominated  Bryan, 
but  named  a  separate  candidate  for  second  place. 

The  campaign  which  followed  was,  despite  the 
attempt  to  make  the  tariff  the  principal  issue,  determined 
mainly  on  the  question  of  the  gold  or  silver  standard. 
McKinley  finally  came  out  unreservedly  for  gold,  and 
the  question  was  comprehensively  discussed. 
Non-partisan  The  Republicans  desired  to  hold  as  large  a  portion  of 
Money  the  silver  vote  within  their  organization  as  possible,  and 

League.  their  campaign,  especially  in  certain  localities,  was 
more  in  the  nature  of  an  appeal  to  the  advocates  of 
silver  than  an  earnest  attempt  to  show  the  error  of  their 
position  and  danger  to  the  material  interests  of  the 
country  in  case  their  policy  should  prevail.  The  public 
were  therefore  dependent  upon  the  independent  press 
and  ^7J7-independent  element  in  both  political  parties 
for  sound  money  literature  and  sound  money  arguments. 
In  this  connection  most  valuable  and  most  effective 
service  was  rendered  by  the  National  Sound  Money 
League  under  the  leadership  of  such  men  as  Henry 
Villard,  J.  Sterling  Morton,  John  K.  Cowen,  M.  E.  In- 
galls,  George  Foster  Peabody,  Horace  White,  J.  Ken- 
nedy Tod,  H.  P.  Robinson,  John  B.  Jackson,  James  L. 


SILVER    CONTEST  OF  1896  387 

Blair,  Louis  R.  Ehrich,  E.  V.  Smalley,  A.  B.  Hepburn, 
and  many  others. 

They  published  in  Chicago  a  paper  known  as  Sound  Its  effective 
Money,  which  was  gratuitously  distributed  to  the  press 
of  the  country,  to  public  speakers,  and  to  leaders  and 
moulders  of  thought.  In  this  manner  they  furnished 
data  and  arguments  in  the  interest  of  right  thinking 
and  right  voting.  They  as  well  as  other  economists 
contributed  largely  to  its  columns.  They  raised  large 
sums  of  money,  which  were  thus  expended  in  a  purely 
academic  campaign.  The  dishonesty  of  free  coinage  of 
silver  at  the  ratio  of  16  to  1,  when  the  commercial  ratio 
was  more  than  twice  as  great,  was  boldly  proclaimed,  and 
logic  reenforced  by  history  adduced  in  demonstration. 
From  the  non-partisan  character  of  their  organization 
they  were  able  to  reach  and  command  the  attention  of 
people  who  would  have  rejected  similar  matter  emanat- 
ing from  a  political  organization. 

The  contentions  of  the  silver  men  may  be  summarized  Contentions 

of  free-silver 
as  follows  : advocates. 

i.  Demonetization  of  silver  had  deprived  the  people  of  one- 
half  the  primary  money  made  available  by  nature. 

2.  This  great  contraction  of  money,  increased  by  the  falling 
off  in  the  production  of  gold,  had  caused  the  steady  downward 
trend  in  prices  since  1873. 

3.  The  consequent  enhancement  of  the  purchasing  power 
of  gold  enormously  increased  the  obligations  of  the  debtors 
having  deferred  payments  to  make. 

4.  These  unsatisfactory  conditions  would  be  aggravated  by 
concentrating  upon  one  metal  only  the  measuring  of  values  and 
debt-paying  power;  while  the  alternative  existed  of  paying  in 
either  metal,  the  danger  of  inordinate  enhancement  of  one  was 
neutralized. 

5.  The  farmer  was  under  the  gold  standard  compelled  to 
compete  with  producers  in  other  lands  (India,  etc.),  where 
labor  was  cheap  and  the  silver  basis  prevailed. 


388 


CONTEST  FOR  SOUND  MONEY 


Contentions 
of  the  oppo- 
sition. 


6.  The  United  States  should  take  the  lead  by  opening  the 
mints  to  free  and  unlimited  coinage  of  silver,  which  would  surely 
bring  silver  to  parity  and  compel  other  nations  to  do  likewise. 

7.  The  United  States  required  a  larger  volume  of  money, 
and  free  coinage  was  the  proper  way  of  increasing  it,  especially 
as  the  country  produced  so  much  silver. 

The  international  bimetallists  generally  agreed  with 
the  contentions  1  to  4,  but  insisted  that  independent 
action  by  the  United  States  would  defeat  the  object  in 
view,  place  the  country  on  a  silver  basis,  to  the  lasting 
detriment  of  all  interests. 

The  gold  advocates  maintained :  — 

1.  That  the  volume  of  money  had  actually  increased  in 
greater  ratio  than  population,  and  that  the  growing  use  of 
credit  instruments  had  added  to  the  media  of  exchange. 

2.  That  the  fall  in  prices  was  due  chiefly,  and  probably 
wholly,  to  improved  methods  of  production,  and  had  no  rela- 
tion to  the  demonetization. 

3.  That  producers  were  also  consumers,  and  hence  had  to 
pay  less  for  commodities,  so  that  relatively  they  were  not  injured 
by  the  fall  in  prices. 

4.  That  the  theory  of  having  two  standards  was  a  delusion. 
Only  one  thing  could  actually  be  a  standard.  That  in  fact  gold 
was  the  only  standard,  silver  being  measured  by  it. 

5.  That  free  coinage  meant  depreciated  money,  than  which 
no  device  was  more  potent  in  cheating  both  the  producer  and 
consumer.  It  would  precipitate  the  country  upon  a  silver 
basis  with  gold  at  a  fluctuating  premium  as  in  Mexico,  not  only 
contracting  the  volume  of  money,  but  causing  untold  injury  to 
all  interests. 

6.  That  Europe  would  only  be  too  glad  to  have  the  United 
States  take  up  the  silver  burden  alone,  enhancing  the  value  of 
its  stock  of  silver,  but  would  not  follow  the  example. 

7.  That  the  volume  of  money  was  then  greater  than  the 
needs  of  the  country,  and  when  greater  needs  manifested  them- 
selves the  supply  would  come  from  abroad  in  the  shape  of  gold 
and  from  the  product  of  our  own  mines  at  home,  the  output  of 
which  was  now  rapidly  increasing. 


SILVER    CONTEST  OF  1896  389 

The  silver  men  appealed  to  the  farmers  as  producers.  Democrats 
The  opposition  appealed  to  the  workmen,  especially  in 
manufacturing  lines,  and  the  tariff  question  was  dex- 
terously used  to  supplement  their  arguments  in  favor  of 
an  honest  dollar.  The  division  of  parties  was  almost 
sectional.  Eastern  Democrats  refused  to  follow  the 
leaders  of  the  West  and  South,  and  the  Central  Western 
states  were  looked  upon  as  the  battle-ground.  They 
generally  joined  with  the  East,  and  Bryan's  defeat  was 
regarded  as  a  declaration  by  the  Nation  in  favor  of  the 
gold  standard.  The  popular  vote  was,  McKinley 
7,164,000,  Bryan  6,562,000.  Fortified  and  encouraged 
by  such  a  vote,  the  silver  advocates  had  no  idea  of 
abandoning  the  contest. 

The  exports  of  gold,  as  before  stated,  continued  in  Gold  move- 
large  volume  during  the  latter  half  of  the  fiscal  year,  — 
January  to  July,  1896.  Thereafter  imports  exceeded 
exports.  During  this  movement,  the  withdrawals  of 
gold  from  the  Treasury  were  in  excess  of  the  exports, 
and  continued  when  exports  ceased,  showing  that  the 
fear  of  Bryan's  election  and  a  silver  standard  caused 
hoarding.  Fully  $50,000,000  was  withdrawn  from  the 
Treasury  because  of  this  fear.  The  gold  reserve,  which 
had  risen  to  $129,000,000  in  March,  fell  to  less  than 
$101,000,000  in  August.  After  the  election  the  gold 
reserve  steadily  increased. 

The  average  price  of  silver,  which  had  fallen  below 
63^  cents  per  ounce  in  1894,  recovered  to  6y\  cents  in 
1896;  but  after  the  election  a  downward  movement  set 
in  from  which  there  was  no  reaction  for  several  years. 

Both  Carlisle  and  Cleveland,  in  their  last  communica-  Cleveland 
tions  to  Congress,  elaborated  and  vigorously  argued  for  ^fmoT  "^ 
the  retirement  of  the  legal  tender  notes.     In  order  to  greenbacks, 
meet  their  redemption  the  people  had  incurred  obliga- 
tions in  the  form  of  bonds  in  excess  of  $262,000,000, 


390  CONTEST  FOR  SOUND  MONEY 

which  would  require,  if  held  to  maturity,  a  further 
payment  for  interest  of  $379,000,000,  making  a  total 
cost  of  $641,000,000  on  account  of  these  notes,  and  the 
notes  were  still  outstanding  and  unpaid.  This  form  of 
currency,  designed  as  a  temporary  expedient,  and  re- 
tained because  of  its  supposed  economy  (being  a  non- 
interest-bearing  loan),  had  proven  most  burdensome  and 
costly  both  in  direct  taxation  and  indirect  injury  to 
business  affairs.  Untoward  events  would  again  produce 
similar  results  unless  these  notes  were  finally  retired. 
Condition  of  When  Cleveland  assumed  office  March  4,  1893,  he 
y'  found  a  gold  reserve  of  $103,284,219,  and  other  avail- 
able cash  in  the  Treasury  $20,843,869.  When  he 
retired  from  office  in  March,  1897,  he  left  $148,661,209 
gold  reserve,  and  $64,176,047  other  available  cash,  show- 
ing an  increase  of  Treasury  cash  of  $88,709,168.  The 
four  bond  issues  placed  during  his  administration  netted 
the  Treasury  $293,388,061,  hence  $204,678,893  of  the 
money  received  from  bond  sales  were  used  for  current 
expenses.  The  ordinary  expenses  of  government,  by 
the  accepted  principles  of  good  administration,  should 
be  met  by  current  taxation.  The  tariff  and  revenue  law 
passed  during  the  Cleveland  administration  failed  to 
produce  needed  revenue,  which  would  unquestionably 
have  averted  a  very  large  part  of  the  troubles  experi- 
enced by  the  administration  and  by  the  public  generally. 
Carlisle  was  forced  to  issue  bonds  under  existing  author- 
ity to  replenish  the  gold  reserve.  The  gold  thus  received 
was  paid  out  in  redemption  of  legal  tender  notes,  which 
had  immediately  to  be  used,  together  with  some  of  the 
gold,  to  meet  current  expenses.  Had  he  possessed  other 
money  for  current  use,  and  thus  been  able  to  impound 
the  redeemed  notes,  the  gold  reserve  would  have  been 
more  easily  maintained.  He  was  forced  to  proclaim  the 
weakness  of  the  Treasury  and  assail  the  credit  of  the 


SILVER   CONTEST  OF  \\ 


391 


government  with  each  bond  issue,  made  ostensibly  for 
the  purpose  of  maintaining  the  gold  reserve,  but  in  part 
as  well  for  the  purpose  of  meeting  the  ordinary  expense 
of  government.     Had  Congress  granted  the  authority  Fatal  inac- 

.       ,  .     ,  -  ,  tion  of  Coti- 

asked  to  borrow  tor  temporary  purposes  upon  exchequer  gress. 
notes,  smaller  bond  issues  would  have  been  required  and 
less  trouble  and  distrust  would  have  been  experienced. 

The  national  banks  were  constantly  growing  in  im- 
portance and  usefulness  as  banks  of  deposit  and  dis- 
count. Their  safe  and  conservative  management  had 
won  for  them  a  place  in  public  confidence  and  favor 
unsurpassed  by  the  best  institutions  in  any  country. 
The  silver  controversy  had  for  several  years  commanded 
the  attention  of  Congress  to  the  exclusion  of  legislation 
affecting  bank  circulation.  The  condition  and  changes 
sufficiently  appear  in  the  statistics  following. 


STATISTICAL   RESUME 
(Amounts  in  millions) 
National  Finances 


Revenue 

Expenditures 

Price  of  4's 

0  j 

E  fc 
w  a 
Pert 

1  + 

% 

5  H 
Z  B 

<  w 

HQ 

1 

0 

u  a 
,50 
+  1 

1907 

Fiscal 
Year 

I 
0 

9 
O 

V 

X 

0 

"3 

0 
H 

b 

c 

1 

0 

§ 

V 

a 

0 
H 

High 

Low 

1 891 

220 

»73 

393 

318 

38 

356 

+  37 

1006 

-  6l 

122 

Il6 

1892 

177 

178 

355 

322 

23 

345 

+  10 

968 

"  38 

"8* 

114 

1893 

203 

183 

386 

356 

27 

383 

+  3 

961 

-  7 

"5 

108 

1894 

132 

166 

298 

340 

28 

368 

-  70 

1017 

+  56 

116 

112$ 

1895 

152 

161 

313 

325 

31 

356 

-  43 

1097 

+  80 

"3t 

I IO 

1896 

ICO 

167 

327 

317 

35 

352 

-  25 

1223 

+  126 

112^ 

106 

392 


CONTEST  FOR  SOUND  MONEY 


Circulation 


July  ist 

Q 
O 

O 

w4   cn 

x  i 
ri  0 

> 

Bl 

-  0 

au 
5 

t/3 

OS  Ul 

S  H 

en  H 
<  0 

H 

<   ■  05 

z  *  » 

0  z  C 

5m  z 

?! 
0 

H 

si 

z 

5z 

0!  O 

•i 
?  ° 

oP 

Ah 

«3 

1891  .  . 

647 

388 

78 

347 

50 

168 

1678 

180 

1498 

64 

$23.41 

1892  .  . 

664 

389 

77 

347 

102 

173 

1752 

I51 

l60I 

66 

24.44 

1893  •  • 

598 

39i 

77 

347 

147 

179 

1739 

142 

1597 

67 

23.85 

1894  .  . 

627 

395 

76 

347 

153 

207 

1805 

144 

l66l 

68 

24.28 

1895  •  • 

636 

401 

77 

347 

146 

212 

1819 

217 

l602 

70 

22.93 

1896  .  . 

599 

422 

76 

347 

130 

226 

1800 

294 

I506 

7i 

21.10 

1  Includes  certificates. 


Exports  and  Imports  and  Gold  Movement 


Merchandise 

Silver 

Gold 

M 

«  w  3 

h  felO 

0  w 

2  0 

M 
M 

Fiscal 
Year 

I 

J 

0 

a 
B 

ft  da, 
W  1  + 

0 

D. 
X 

I 
| 

"j  do. 

kWh 
M  1  + 

0 

a, 

M 

W 

S 

J 

i!  da 
0  *  P 

w  1  + 

Id 

« 

0 
0 
O 

1891 

884 

845 

-  39 

24 

26 

+  2 

86 

19 

-67 

6 

Il8 

1892 

1030 

827 

-203 

34 

29 

-  5 

50 

50 

— 

9 

114 

1893 

848 

866 

+  18 

42 

34 

-  8 

109 

21 

-88 

102 

95 

1894 

892 

655 

-237 

51 

20 

-3i 

77 

72 

-  5 

85 

65 

1895 

808 

732 

-  76 

48 

20 

-28 

67 

36 

-3i 

117 

108 

1896 

883 

780 

-103 

61 

27 

-34 

112 

34 

-78 

159 

102 

SILVER   CONTEST  OF  1896 


393 


Production  of  Gold  and  Silver 


World 

United  States 

■ 

B 

3 

O 

< 

u 

O 

Calendar 

Silver 

Silver 

H 

>3 

Year 

2  ° 

Gold 

M 

Ml 

.§■5 

0^ 

0     > 

O 

Gold 

o> 
O 

g-aj 

E'u  B 
0     > 

M 

y 
E 

s 

1 

S 

O 
O 

« 

1891       .      . 

131 

177 

136 

33 

75 

58 

#  .98800 

20.92 

.764 

1892      .     . 

147 

198 

133 

33 

82 

56 

•87H5 

23.72 

•674 

1893      •     • 

157 

214 

129 

36 

78 

47 

.78030 

26.49 

.604 

1894      .     . 

181 

213 

IO4 

40 

64 

3i 

•63479 

32.56 

.491 

1895       •     • 

199 

217 

I IO 

47 

72 

36 

.65406 

31.60 

•5°5 

1896      .     . 

202 

203 

1 06 

53 

76 

40 

•67565 

30.59 

.522 

The  Silver  Acquisition 


Bullion  Purchased 

O  </i 

2  0 
J3Q 

OS 

p 

0 

Net  Silver 
in  Treasury 

Fiscal  Year 

Fine 
Ounces 

Cost 

Average 

Dollars 

Bullion 

18911.     .     . 

3 

3 

#1.0901 

1891   . 

48 

51 

1. 045 1 

24 

391 

59 

307 

22 

32 

1892   . 

54 

51 

.9402 

6 

397 

57 

327 

5 

77 

1893   • 

54 

45 

.8430 

1 

398 

57 

327 

7 

118 

1894   . 

12 

9 

•7313 

3 

401 

53 

327 

16 

127 

1895   . 

— 

— 



1 

402 

52 

320 

30 

124 

1896   . 

— 

— 



20 

422 

52 

331 

36 

119 

1  Under  law  of  1878  to  August  14,  1890. 


394 


CONTEST  FOR  SOUND  MONEY 


National  Banks 
(at  dates  nearest  January  i) 


Year 

Num- 
ber 

Capital 

Surplus 

De- 
posits 

Circu- 
lation 

Specie 

Legals 

Loans 

1891  .     .     . 

1892  .     .     . 

1893  •     •     • 

1894  .     .     . 

1895  •     •     • 

1896  .     .     . 

3573 
3692 

3784 
3787 
3737 
3706 

658 
677 
690 
682 
666 
657 

215 
228 
240 

247 

245 
246 

1515 

1620 

1778 

1553 
1719 

1734 

123 

135 
146 
180 
169 

185 

190 
208 
2IO 

251 
218 
207 

88 
103 
109 
163 
157 
131 

1932 
2001 
2167 
1872 
1992 
2041 

State  Banks,  etc. 


State  Banks 

Total  Resources 

Year 

Number 

Capital 

Surplus 

De- 
posits 

Cash 

Loans 

Trust 
Com- 
panies 

Private 
Banks 

Savings 
Banks 

1891  . 

1892  . 

1893  • 

1894  . 

1895  • 

1896  . 

2572 
3191 

3579 
3586 
3774 
37o8 

209 
234 
251 
244 
250 
240 

60 
67 

74 
74 
74 
7i 

557 
649 
707 
658 
712 
696 

108 
130 
137 
H5 
143 
128 

623 
700 

758 
666 

693 
697 

537 
600 
727 

7°5 
807 

855 

152 
147 
108 

I05 
130 

94 

1855 
I964 
2OI4 
I981 
2C54 
2143 

Miscellaneous  Financial 


Clearing-house 
Transactions 

Savings  Banks 

Failures 

Year 

New  York 

U.S. 

Depos- 
itors 
(ooo's) 

De- 
posits 
(Mill- 
ions) 

Average 

Num- 
ber 
(ooo's) 

Liabil- 
ities 

(Mill- 
ions) 

1891  .... 

1892  .... 

1893  .... 

1894  .... 

1895  .... 

1896  .... 

34,054 
36,280 

34,421 
24,230 
28,264 

29.351 

57,299 
60,884 
58,881 
45,028 
50,975 
5r>936 

4533 
4782 

4831 
4778 
4876 
5065 

1623 

1713 
I785 
I748 
l8ll 
I907 

358 
358 

37° 
366 

371 

377 

12 
IO 

l5 

14 
13 
15 

190 

114 

347 
173 
173 
226 

CHAPTER   XVIII 

Reform    Act   of    1900 
1897  to  1902 

The  gold  standard  advocates,  who  hoped  that  McKin- 
ley's  election  would  be  accepted  as  a  final  declaration  in 
favor  of  the  gold  standard  and  that  legislation  would  be 
speedily  enacted,  under  the  influence  of  his  administra- 
tion, insuring  such  result,  were  doomed  to  disappoint- 
ment. McKinley  was  a  safe  exponent  but  not  a  moulder 
of  public  sentiment.  His  characteristics  in  this  respect 
earned  him  the  criticism  of  always  "keeping his  ear  to 
the  ground."  The  leaders  of  the  Republican  party  were 
still  influenced  by  the  habit  of  deference  to  silver  advo- 
cates and  silver  interests,  and  the  very  large  vote  cast 
for  Bryan,  under  stress  of  a  presidential  campaign,  was 
a  tangible  evidence  of  strength  and  a  distinct  source  of 
inspiration  far  outweighing  any  sense  of  discouragement 
involved  in  his  defeat.  McKinley's  congressional  record 
upon  the  question  of  the  standard  justified  the  silver 
advocates  in  expecting  no  drastic  measures  at  his  hands, 
and  the  record  of  other  Republican  leaders  fortified  the 
hope  of  sufficient  Republican  assistance  to  defeat  such 
measures,  should  they  appear.  The  gold  standard  had 
distinctly  triumphed,  but  the  lines  of  battle  were  still 
drawn,  astute  generals  were  deploying  for  position  on 
either  side,  and  the  struggle  was  to  be  finally  determined 
in  the  presidential  contest  of  1900. 

McKinley  was  easily  persuaded  that  one  more  effort  McKinie/s 

.    .  .  •  1  .  •      r  c  ii.  1  j    international 

to  secure  international  agreement  in  favor  of  the  enlarged 
use  of  silver  as  money  should  be  made.     The  troubles 

395 


396  CONTEST  FOR  SOUND  MONEY 

of  Great  Britain  in  preserving  even  approximate  stability 
in  ratio  between  the  rupee  and  the  pound,  among  other 
causes,  had  precipitated  a  general  discussion  of  the 
subject  in  Europe  and  perhaps  justified  this  attempt  on 
the  part  of  our  government.  Senator  Wolcott  (Colo.), 
ex- Vice-President  Adlai  Stevenson,  and  General  Charles 
J.  Paine  were  sent  abroad  as  commissioners.  They 
visited  the  different  capitals  of  Europe,  were  pleasantly 
received,  but  elicited  no  responsive  interest.  The  com- 
plete failure  of  the  mission  was  so  generally  anticipated 
in  advance  that  it  produced  no  appreciable  effect  upon 
public  sentiment  at  home, 
insufficient  a  deficit  in  revenue  of  $18,000,000  was  estimated  for 
1897,  although  the  cash  balance  including  the  gold 
reserve  was  nearly  $213,000,000,  resulting  from  the  pro- 
ceeds of  the  bond  sales  in  1 894-1 896.  The  fact  that 
Cleveland's  struggle  to  maintain  the  gold  standard  was 
largely  caused  and  greatly  intensified  by  insufficient 
revenues  was  fully  understood  and  appreciated.  In  fact, 
the  most  serious  criticism  upon  Cleveland's  administra- 
tion is  his  failure  to  influence  legislation  which  would 
presently  produce  revenue  sufficient  for  his  needs. 

McKinley  convened  Congress  in  extra  session,  and  an 
act  increasing  the  tariff  generally,  including  a  reimposi- 
tion  of  part  of  the  duty  on  sugar,  which  had  been  abol- 
ished by  the  McKinley  act  of  1890,  soon  produced 
sufficient  revenue. 

Lyman  J.  Gage,  for  more  than  a  generation  a  success- 
ful banker  in  Chicago,  had  been  appointed  Secretary  of 
the  Treasury.  He  brought  his  long  experience  and 
study  to  the  work  of  solving  the  currency  problem,  and 
before  the  regular  session  of  Congress  opened  had 
elaborated  a  complete  plan  which  was  submitted  to  that 
body  in  December,  1897.  His  purpose  was,  as  he  ex- 
pressed it,  to  put  the  country  squarely  upon  a  gold  basis. 


REFORM  ACT  OF  1900  397 

In  general  the  plan  was  designed  to  gradually  replace  Gage's  gold 
the  legal  tender  notes  with  national  bank-notes  ;  the  in-  measure, 
crease  of  the  gold  reserve  to  $125,000,000 ;  the  separation 
of  the  currency  functions  of  the  Treasury  by  establish- 
ing a  separate  bureau  for  the  purpose ;  notes  once 
redeemed  in  gold  not  to  be  reissued  except  for  gold ; 
$200,000,000  notes  to  be  placed  in  a  reserve  fund  and 
thus  impounded  in  the  Treasury  as  soon  as  practicable ; 
refunding  of  the  debt  into  2\  per  cent  bonds  ;  permit- 
ting banks  to  deposit  either  bonds  or  government 
currency  to  50  per  cent  of  their  capital  and  receive  cir- 
culating notes  to  the  par  thereof ;  notes  issued  on  bonds 
subject  to  a  tax  of  \  per  cent  annually,  those  issued 
on  currency  free  from  tax ;  the  banks  so  depositing 
bonds  or  currency  to  be  permitted  to  issue  circulation  Bank-note 
in  excess  of  such  deposits  equal  to  25  per  cent  of  their 
capital,  to  be  secured  by  first  lien  upon  assets  and  by  a 
safety  fund  accumulated  by  means  of  a  2  per  cent  an- 
nual tax  upon  such  additional  circulation ;  the  minimum 
capital  of  banks  to  be  $25,000  and  no  bank-notes  under 
$10  to  be  issued. 

In  order  to  show  the  sufficiency  of  the  2  per  cent  fund 
proposed  to  guarantee  bank-notes,  he  presented  the 
results  of  failures  of  national  banks  from  the  beginning 
of  the  system,  which  showed  that  such  a  fund  would 
have  protected  every  note  holder  under  the  measure 
proposed.  President  McKinley  only  partially  indorsed 
the  plan,  recommending  its  careful  study  by  Congress. 
He  heartily  concurred  in  the  provision  to  reissue  re- 
deemed notes  only  for  gold,  as  soon  as  the  revenues 
exceeded  the  government's  expenses. 

The  business  interests  of  the  country  were  keenly  Indianapolis 

..  ,  .        -  .  ii,,i  monetary 

alive  to  the  necessity  for  action,  and  under  the  leader-  convention, 
ship  of  H.  H.  Hanna  delegates  from  all  sections  assem- 
bled in  convention  at  Indianapolis.     The  meeting  was 


398  CONTEST  FOR  SOUND  MONEY 

thoroughly  representative  in  character,  including  some 
of  the  ablest  men  in  the  country.  The  present  Secretary 
of  the  Treasury,  Leslie  M.  Shaw,  then  governor  of 
Iowa,  among  others,  addressed  the  convention.  A  very 
able  commission  was  created,  including  Senator  George 
F.  Edmunds  as  chairman,  and  ex-Secretary  Charles  S. 
Fairchild  and  J.  Laurence  Laughlin,  among  its  mem- 
bers, to  prepare  a  comprehensive  measure  or  proposed 
law  for  currency  and  coinage  reform,  together  with  an 
academic  discussion  of  the  whole  subject,  for  submission 
to  Congress,  and  to  the  public  generally.  Their  report, 
an  octavo  volume  of  600  pages,  showed  great  research, 
was  forceful,  lucid,  and  convincing,  and  had  great 
influence  upon  the  public  mind. 

its  currency  Their  recommendations  included  the  following :  de- 
reform  meas- 
ure, claring  the  gold  dollar  the  standard  of  value,  but  with- 
out affecting  the  legal  tender  quality  of  the  silver  dollar  ; 
no  further  coinage  of  silver  dollars ;  establishing  a  sep- 
arate bureau  of  issue  and  redemption,  which  should  hold 
a  25  per  cent  gold  reserve  against  both  classes  of  legal 
tender  notes  outstanding,  and  a  5  per  cent  gold  reserve 
against  the  total  silver  dollar  coinage,  the  reserve  to  be 
maintained  by  sales  of  3  per  cent  gold  bonds  if  neces- 
sary ;  silver  dollars  as  well  as  legal  tenders  to  be  re- 
deemed in  gold ;  no  silver  certificates  above  $5  to  be 
issued ;  $50,000,000  of  the  legal  tender  notes  when 
redeemed  to  be  cancelled,  thereafter  such  notes  to  be 
cancelled  equal  in  amount  to  the  increase  of  national 
bank  circulation,  and  after  five  years  the  remainder  to 
be  cancelled  in  five  equal  annual  instalments ;  after  ten 
years  the  outstanding  notes  to  cease  having  legal  tender 
power ;  the  silver  bullion  in  the  Treasury  to  be  sold  for 
gold  to  maintain  the  reserve ;  no  more  currency  certifi- 
cates and  no  legal  tender  notes  under  $10  to  be  issued; 
certificates  of  indebtedness  (3  per  cent  five-year  gold) 


REFORM  ACT  OF  1900  399 

authorized  to  meet  any  revenue  deficiencies ;  national  Abrogation 
banks  to  be  permitted  to  issue  circulation  equal  to  their  deposit 
capital  less  real  estate,  only  25  per  cent  of  the  amount  advocated. 
to  be  secured  by  bonds  deposited  with  the  Treasury, 
such  security  to  be  diminished  after  five  years,  one-fifth 
annually,  after  ten  years  no  bond  security  to  be  required ; 
a  5  per  cent  gold  guaranty  fund  to  be  maintained  in  the 
Treasury,  to  be  invested  in  bonds  of  the  United  States ; 
bank-notes  to  be  a  paramount  lien  upon  all  assets  of  a 
bank ;  the  notes  issued  in  excess  of  60  per  cent  of  capi- 
tal to  be  subject  to  a  2  per  cent  tax,  and  notes  in  excess 
of  80  per  cent  to  pay  6  per  cent  tax ;  a  tax  of  \  per  cent 
a  year  on  capital,  surplus,  and  profits ;  no  notes  under 
$10  to  be  issued,  the  limit  on  retiring  circulation  to  be 
removed;  small  banks  ($25,000  capital)  and  branch 
banks  to  be  permitted ;  one-fourth  of  the  required  re- 
serves to  be  held  in  bank  in  gold ;  the  5  per  cent  cur- 
rent redemption  fund  to  be  continued,  but  no  longer  to 
be  counted  as  part  of  reserves. 

'A  bill  embodying  these  provisions  was  introduced  in 
Congress,  but  no  action  was  taken  thereon. 

Under  the  portion  of  the  "Sherman  Law"  of  1890  Treasury 
which  had  not  been  repealed,  the  Treasury  continued  to  repiaced. 
coin  silver  dollars  as  "  needed  to  redeem  the  Treasury 
notes,"  and  as  rapidly  as  these  notes  were  so  redeemed 
they  were  cancelled,  and  when  the  dollars  returned  to 
the  Treasury  silver  certificates  were  issued,  thus  substi- 
tuting the  latter  form  of  paper  for  the  Treasury  notes 
and  diminishing  to  that  extent  the  direct  burden  upon  the 
gold  reserve. 

The  friends  of  the  gold  standard  became  aggressive, 
and  presented  to  Congress  a  proposition  to  redeem  silver 
dollars  in  gold.  This  roused  the  silver  leaders  who 
repelled  it  as  an  attack  upon  the  legal  tender  quality  of 
the  "  dollar  of  our  daddies,"  and  the  Senate  passed  a 


400  CONTEST  FOR  SOUND  MONEY 

resolution  against  the  proposition ;  the  House,  however, 
refused  to  concur.  The  whole  trend  of  the  administra- 
tion toward  the  establishment  of  the  single  gold  standard, 
slow  though  it  was,  gave  to  Bryan  and  his  lieutenants 
great  hope  of  political  success  in  the  ensuing  campaign. 
The  declared  issue  had  theretofore  been  between  the 
single  silver  standard,  toward  which  the  country  had 
been  so  rapidly  tending  prior  to  the  repeal  of  the  sil- 
ver purchase  law,  and  the  bimetallic  standard  with  a 
Activity  of  strong  tendency  to  the  single  gold  standard.  Aggres- 
goidCa CS  °  s*ve  acti°n  m  favor  of  the  latter  was  likely  to  concen- 
trate all  other  elements  in  opposition,  and  the  silver 
advocates  scented  future  victory  in  the  situation.  They 
were  doomed  to  disappointment.  The  Spanish  War, 
which  occurred  at  this  time  (1898),  united  the  patri- 
otic sentiment  of  the  country  in  support  of  the  adminis- 
tration. Republicans  no  longer  entertained  any  doubt  of 
McKinley's  reelection,  and  assumed  a  bolder  attitude  in 
favor  of  the  gold  standard,  as  subsequent  legislation 
shows. 
Spanish  An  almost  continuous  rebellion  against  Spanish  rule 

had  existed  in  Cuba  for  more  than  a  quarter  of  a  cen- 
tury. The  military  occupation  of  the  island  necessarily 
interfered  with  commercial  relations  with  the  United 
States.  Exorbitant  and  unusual  tariff  exactions  were 
imposed,  coupled  with  unexplained  and  prolonged  delay 
in  passing  goods,  both  for  export  and  import,  through 
the  custom-houses,  producing  conditions  inimical  to 
successful  business ;  and  these  conditions  were  mod- 
ified only  by  the  improper  use  of  money  with  customs 
officials.  Self-respecting  merchants  found  it  difficult 
to  engage  in  trade  with  Cuba.  Utter  neglect  of  sani- 
tation in  the  Cuban  ports,  excusable  or  explainable 
perhaps  by  the  chronic  state  of  war,  bred  yellow  fever 
without  interruption. 


REFORM  ACT  OF  1900  40 1 

Cuban  ports  were  in  close  promixity  to  the  Gulf  ports  Misrule 
of  the  United  States  and  easily  reached  by  the  smaller 
sailing  craft,  and  hence  a  periodic  scourge  of  the  yellow 
pest  was  more  or  less  prevalent  in  our  own  country. 
The  only  means  of  protecting  our  own  people  from 
this  disease  seemed  to  be  to  compel  proper  sanitation 
in  Cuba.  These  conditions  were  aggravating,  and  long 
continuance  had  exasperated  people  almost  to  the  ex- 
plosive point.  According  to  the  laws  of  nations  no 
provocation  of  war  existed,  and  yet  the  happening  of 
any  untoward  event  was  bound  to  precipitate  a  conflict. 
The  blowing  up  of  the  battleship  Maine  in  Havana 
harbor  February  15  and  the  death  of  a  large  number 
of  American  sailors  produced  a  crisis,  and  the  conflict 
became  inevitable. 

The  recounting  of  the  above  events  seems  justifiable 
here  for  the  reason  that  the  Spanish  War,  resulting  as 
it  did,  greatly  strengthened  McKinley's  administration 
in  the  popular  mind  and  nerved  the  Republican  leaders 
to  firm  action  in  behalf  of  the  gold  standard,  relieved 
as  they  were  from  fear  of  popular  defeat.  The  war 
brought  other  topics  to  the  front,  and  silver  lost  its 
commanding  interest. 

To  meet  the  expenses  of  the  war  taxes  were  increased  War 
and  a  loan  of  $200,000,000  in  3  per  cent  bonds  was 
placed  at  par.  The  act  authorizing  the  latter  con- 
tained a  provision  which  directed  a  more  rapid  coinage 
of  silver  dollars.  It  was,  in  fact,  with  difficulty  that 
the  silver  majority  in  the  Senate  was  restrained  from 
forcing  a  free  silver  amendment  to  this  measure,  so 
imperatively  demanded  by  the  exigencies  of  the  war. 
In  the  House,  Bland  had  proposed  the  further  issue  of 
legal  tender  notes  to  cover  the  cost  of  the  war,  instead 
of  issuing  bonds. 

After  the  tariff  revision  of  1897  was  completed,  thus 


402 


CONTEST  FOR  SOUND  MONEY 


Effects  of 
tariff  re- 
vision. 


The  national 
banks. 


Currency 
reform 
determined 
upon. 


rendering  any  further  change  in  the  near  future  improb- 
able, the  industrial  interests  rapidly  recovered  from  the 
depression,  and  an  era  of  prosperity  set  in  which  was 
materially  stimulated  by  the  great  demands  of  the 
government  for  war  supplies.  The  world's  production 
of  gold  steadily  increased  until  disturbed  by  the  South 
African  War,  and  the  United  States,  with  favorable 
trade  balances  and  a  heavy  home  output,  augmented 
its  gold  stock  at  a  rate  greater  than  that  shown  by  any 
other  country.  Ability  to  maintain  the  gold  standard 
was  beyond  question. 

The  number  of  national  banks  continued  to  diminish 
until  July,  1898,  when  there  were  but  3582  (compared 
with  3830  in  1893  and  3634  in  May,  1897).  Their  cir- 
culation in  July,  1898,  stood  at  $190,000,000.  The  issue 
of  the  3  per  cent  war  loan  at  par  enabled  the  banks  to 
increase  circulation  at  a  profit,  and  by  December,  1899, 
it  had  increased  to  $205,000,000.  The  number  of 
banks  had  in  the  same  period  increased  20,  but  their 
aggregate  capital  had  diminished  over  $16,000,000. 
The  circulation  of  the  country  was  now  $25.50  per 
capita.  Silver  declined  to  about  60  cents  per  ounce, 
making  the  market  ratio  to  gold  34  to  1  and  the  bullion 
value  of  the  silver  dollar  about  47  cents. 

The  Republican  leaders  in  Congress  determined  in 
December  (1899)  that  the  time  for  action  on  the  currency 
question  had  arrived.  In  the  House  a  Republican  caucus 
adopted  a  bill  upon  the  general  lines  proposed  by  the 
Indianapolis  conference,  but  varying  in  certain  particu- 
lars. This  bill  passed  in  January  by  a  majority  of  fifty. 
The  Senate  passed  a  separate  measure  differing  in  many 
respects.  The  two  bills  went  to  conference,  an  agree- 
ment was  reached  early  in  March,  and  on  the  14th  of 
that  month  the  conference  bill  passed  and  was  signed 
by  the  President. 


REFORM  ACT  OF  1900  403 

The  act  declared  the  gold  dollar  to  be  the  standard  The  act  of 
unit  of  value,  and  all  forms  of  money  issued  or  coined 
by  the  United  States  were  to  be  maintained  at  a  parity 
therewith  by  the  Secretary  of  the  Treasury.  Both 
classes  of  legal  tender  notes  were  to  be  redeemed  in 
such  gold  coin,  the  reserve  for  the  purpose  to  be 
increased  at  once  to  $150,000,000,  and  maintained,  if 
necessary,  by  sales  of  3  per  cent  gold  bonds.  Notes 
when  redeemed  were  to  be  reissued  only  for  gold,  but  if 
the  gold  were  obtained  out  of  the  general  Treasury  fund, 
they  might  be  used  for  any  purpose  except  to  meet 
deficiencies  in  revenues.  The  legal  tender  quality  of 
the  silver  dollar  remained  undisturbed  by  the  law.  The 
monetary  functions  of  the  Treasury  were  separated  from 
those  of  a  merely  fiscal  character  by  the  establishment 
of  a  separate  division.  Treasury  notes  of  1 890  were  to  be 
cancelled  as  received,  and  silver  certificates  substituted 
therefor ;  the  issue  of  gold  certificates  to  be  resumed 
and  continued  unless  the  gold  reserve  falls  below  Maintenance 
$100,000,000,  or  the  greenbacks  and  silver  certificates  in  °eSerVe. 
the  general  fund  exceed  $60,000,000,  and  the  issue  of 
currency  certificates  to  be  discontinued.  Denominations 
of  paper  are  regulated  as  follows :  no  gold  certificates 
under  $20,  but  one-fourth  at  least  of  the  issue  to  be  $50 
and  under;  silver  certificates,  90  per  cent  to  be  $10  and 
under,  10  per  cent  $20,  $50,  and  $100;  greenbacks  under 
$10  to  be  retired  as  smaller  silver  certificates  are  issued, 
larger  greenbacks  to  be  substituted ;  $5  national  bank- 
notes to  be  issued  only  to  one-third  of  the  amount  taken 
by  each  bank.  # 

The    limit  of   subsidiary   coinage   was  increased   to  Refunding 
$100,000,000,  the  silver  on  hand  to  be  used  for  this  pur- 
pose.     The  new  3  per  cent  government  bonds,  the  4  per 
cents  of  1907,  and  5  per  cents  of  1904  outstanding  were 
to  be  refunded  in  the  discretion  of  the  Secretary  into 


404 


CONTEST  FOR  SOUND  MONEY 


Democrat- 
Populist 
opposition. 


"  More 
money  " 
campaign. 


2  per  cent  thirty-year  gold  bonds,  upon  a  2\  per  cent 
income  basis,  the  premium  to  be  paid  in  cash.  National 
banks  were  authorized  in  smaller  towns  with  $25,000 
capital ;  circulation  allowed  to  the  par  of  bonds,  and  to 
the  full  amount  of  unimpaired  capital,  and  banks  depos- 
iting the  new  2  per  cent  United  States  bonds  to  be  taxed 
only  £  per  cent  annually  on  circulation,  whereas  the  tax 
on  circulation  secured  by  any  other  issue  remained  at 
one  per  cent. 

The  provision  of  the  act  of  1882  prohibiting  banks  retir- 
ing circulation  from  again  increasing  the  same  for  a  period 
of  six  months  was  repealed,  but  the  limit  of  the  amount 
which  may  be  retired  in  any  one  month  to  $3,000,000 
remained.  The  final  section  disclaims  any  intention  of 
precluding  bimetallism  if  conditions  prove  favorable. 

Thus  after  a  struggle  covering  many  years  a  number 
of  reforms  in  the  monetary  system  were  carried  through 
in  a  single  legislative  measure.  The  opposition  at  once 
made  itself  manifest.  The  platform  of  the  Democratic- 
Populist  party  in  Nebraska,  which  met  in  convention 
under  the  leadership  of  Bryan  five  days  after  the  pas- 
sage of  the  "gold  standard  law,"  declared  for  free  and 
unlimited  coinage  of  silver  and  the  substitution  of  green- 
backs for  national  bank-notes.  In  many  of  the  other 
states  similar  declarations  were  adopted,  and  although 
the  new  issue  of  "  Imperialism,"  growing  out  of  the  war, 
was  for  a  time  prominent  in  the  presidential  campaign 
following,  the  actual  contest  was  upon  the  question  of 
the  standard  of  values  and  opposition  to  bank-note  cur- 
rency. All  the  former  arguments  for  an  increased 
money  supply  to  come  from  the  remonetization  of  silver, 
the  oppressive  effects  of  the  single  gold  standard,  and 
the  inadequacy  of  the  gold  supply  were  rehearsed  with 
little  effect  as  the  country  was  prospering  as  never 
before  in   its    history.     Prices  of  agricultural  products 


REFORM  ACT  OF  1900  405 

had  risen.  The  excess  of  exports  over  imports  had 
averaged  $560,000,000  a  year  for  the  preceding  three 
years.  The  revenues  produced  a  substantial  surplus. 
The  world's  production  of  gold  was  now  over  $300,000,000 
a  year,  the  United  States  contributing  nearly  one-fourth, 
all  of  which  was  retained.  The  money  in  circulation  in 
the  United  States  had  risen  to  nearly  $27  per  capita. 

Bryan's  renomination  was  a  foregone  conclusion,  and 
he  fatuously  insisted  upon  making  the  silver  question 
the  main  issue.  The  Republicans  renominated  McKin- 
ley,  declared  for  the  gold  standard  and  against  free  coin- 
age of  silver,  and  in  favor  of  legislation  looking  to  an 
equalization  of  interest  rates  by  enabling  the  varying 
currency  needs  of  the  seasons  and  all  sections  to  be 
promptly  met. 

McKinley  was  reelected  by  a  largely  increased  ma-  Gold 
jority,  and  the  country  accepted  the  result  as  indorsing  victorious. 
and  confirming  the  action  of  Congress  in  adopting  the 
gold  standard  by  the  act  of  March  14,  1900.  Good 
results  flowing  from  this  act  were  speedily  manifest. 
The  refunding  of  the  bonds  provided  for  aggregated 
$352,000,000,  and  a  large  amount  of  the  surplus  revenue 
was  paid  out  for  premiums  in  making  the  exchange. 
National  banks  increased  340  in  number,  the  capi- 
tal was  increased  $26,500,000,  and  circulation  nearly 
$86,000,000  compared  with  September  a  year  before. 
Of  the  new  banks  123  were  converted  state  banks  and 
208  were  capitalized  at  the  minimum  of  $25,000.  The 
bond  security  for  circulation  included  $270,000,000  of 
the  new  2  per  cents. 

The  issue  of  gold  certificates  increased  materially,  and  Greater 

it  ,  -11  •  c  volume  of 

the  changes  in  the  denominations  of  paper  money  pro-  money. 
vided  for  by  the  law  progressed  rapidly,  the  silver  cer- 
tificates taking  the  place  of  the  smaller  denominations 
of  other  issues.      With   large  crops  to  be  moved,  the 


406 


CONTEST  FOR  SOUND  MONEY 


Defects  of 
law  of  1900. 


Gage's  plan 
for  elastic 
currency. 


country  did  not  suffer  from  the  usual  money  stringency, 
owing  to  the  large  increase  in  the  gold  stock,  in  bank 
circulation,  and  the  distribution  of  the  surplus  revenue 
in  the  process  of  refunding. 

The  law  of  1900  provided  "that  the  dollar  consisting 
of  twenty-five  and  eight-tenths  grains  of  gold  nine-tenths 
fine,  as  established  by  section  thirty-five  hundred  and 
eleven  of  the  Revised  Statutes  of  the  United  States, 
shall  be  the  standard  unit  of  value,  and  all  forms  of 
money  issued  or  coined  by  the  United  States  shall 
be  maintained  at  a  parity  of  value  with  this  stand- 
ard, and  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury  to  maintain  such  parity."  It  did  not,  how- 
ever, provide  any  method  by  which  this  parity  should 
be  maintained.  Secretary  Gage  in  his  report  for  De- 
cember, 1900,  called  attention  to  this  omission,  and  urged 
that  specific  power  be  given.  He  also  renewed  his 
arguments  in  favor  of  providing  an  elastic  bank  cur- 
rency. While  favoring  branch  banking,  he  recognized 
that  public  sentiment  was  averse  to  such  a  system,  and 
suggested  a  federated  system  or  federated  bank  some- 
what analogous  to  the  general  government  and  the 
states,  one  of  whose  principal  functions  should  be  the 
issue  of  currency.  He  also  recommended  that  bank- 
notes be  secured,  30  per  cent  by  a  deposit  of  govern- 
ment bonds,  20  per  cent  by  a  deposit  of  legal  tenders, 
the  remaining  50  per  cent  of  the  issues  to  be  based  upon 
assets  and  secured  by  a  guaranty  fund. 

Thus  he  hoped  to  accomplish  a  double  reform,  the 
elimination  of  the  greenbacks  and  an  ample  paper  cur- 
rency which  would  not  only,  as  he  demonstrated,  prove 
safe  to  the  holder,  but  would  expand  and  contract  as 
business  needs  warranted. 

The  terrible  tragedy  at  Buffalo,  which  resulted  in  the 
death  of  McKinley  and  the  accession  of  Roosevelt  to 


REFORM  ACT  OF  1900  407 

the  presidency,  engrossed  not  only  Congress  but  the 
public  mind  generally.  Moreover  there  was  a  general 
feeling  that  the  act  of  1900,  ratified  and  confirmed  by 
the  popular  vote  in  the  election  following,  had  rendered 
our  currency  and  our  standard  of  values  safe,  and  that 
further  legislation  had  better  be  deferred  until  experi- 
ence had  demonstrated  its  necessity.  The  prosperity  of 
the  country  was  unprecedented.  Enterprises  requiring  Enormous 
enormous  and  hitherto  unheard-of  amounts  of  capital  expansion, 
were  undertaken.  The  growth  of  banks  and  trust  com- 
panies, the  underwriting  and  flotation  of  securities,  the 
industrial  development,  the  increase  of  exports  without 
a  corresponding  increase  of  imports,  —  all  tended  to 
greatly  enlarge  the  volume  of  business,  and  the  circu- 
lating medium  increased  in  proportion.  By  1901  it 
reached  $28  per  capita,  and  continued  to  grow.  A  large 
part  of  this  was  in  gold,  the  supply  of  which  increased 
$429,000,000  from  1897  to  1 90 1.  Bank-notes  had  also 
increased  more  than  $120,000,000  in  that  period,  while 
silver  issues  of  all  classes  showed  only  the  slight  in- 
crease arising  from  the  seigniorage  on  the  coinage. 
The  character  of  the  increased  supply  of  money  in  use 
was  therefore  sound,  and  the  entire  mass  was  practically 
continuously  employed.  Notwithstanding  this  large  Money 
volume  of  money  the  usual  stringency  appeared  when  the 
crop  season  arrived.  At  its  minimum  of  employment 
in  the  usual  channels  of  trade,  the  surplus  accumu- 
lation in  the  banks  was  rapidly  absorbed  by  the  specu- 
lative demand,  stimulated  no  doubt  by  the  large  return 
of  American  securities  from  abroad  to  pay  the  enormous 
trade  balances  in  our  favor.  Hence,  when  the  maximum 
demand  again  recurred  in  the  crop-moving  season, 
stringency  manifested  itself,  aggravated  by  the  accumu- 
lation in  the  subtreasuries  of  surplus  revenues  which, 
despite  the  laws  reducing  taxes  after  the  war  had  closed, 


408  CONTEST  FOR  SOUND  MONEY 

Treasury  the  great  consuming  power  of  the  Nation  continued  to 
pour  into  the  government's  coffers.  There  were  but 
two  means  of  returning  this  money  to  the  channels  of 
trade,  —  the  purchase  of  bonds  at  high  premiums,  in- 
augurated as  we  have  seen  by  Guthrie  in  1854,  and  the 
placing  of  the  surplus  in  depository  banks.  Both 
courses  necessarily  increased  the  demand  for  and  the 
price  of  government  bonds  (to  be  deposited  as  security 
for  public  moneys),  which  in  turn  tended  to  check  in- 
crease in  bank  circulation. 

The  imperfections  of  the  existing  laws  relating  to 
currency,  and  the  receipt,  safe  keeping,  and  payment 
of  the  public  moneys  by  means  of  our  subtreasury  sys- 
tem, are  illustrated  in  a  practical  manner  with  each  recur- 
ring fall.  These  conditions  continue,  and  their  solution 
remains  a  problem  still  to  be  solved. 
Shaw's  Leslie  fyl.  Shaw  succeeded  Gage  as  Secretary  of  the 

poicy.  Treasury,  and  when  in  the  early  fall  of  the  year  1902 

the  same  evils  manifested  themselves,  he  endeavored  to 
alleviate  the  condition  by  a  broader  construction  of  the 
law  governing  public  deposits,  which  provides  that  such 
deposits  shall  be  secured  to  the  satisfaction  of  the  Sec- 
retary by  "  deposit  of  government  bonds  and  otherwise." 
This  he  rightly  construed  as  authorizing  him  to  accept 
approved  bonds  of  states  and  municipalities  as  part  of 
such  security.  By  this  course  an  equal  amount  of  gov- 
ernment bonds  would  be  released  for  use  to  increase  the 
bank  circulation.  By  this  process  and  by  the  purchase  of 
bonds  and  anticipation  of  interest,  Shaw  was  enabled  to 
render  some  $40,000,000  of  surplus  available  for  use 
in  trade  channels  and  induce  an  increase  of  bank-notes 
to  about  one-half  that  sum. 
Shaw  on  jn  hjs  report  for  the  year,  Shaw  recommended  the 

currency.  issue  of  notes  by  banks  based  upon  assets  and  properly 
safeguarded,  not  by  making  the  notes  a  paramount  lien, 


REFORM  ACT  OF  1900  409 

but  by  means  of  a  guaranty  fund  and  rigid  redemption 
requirements.  He  further  recommended  a  system  of 
public  money  depositories  without  the  bond  security 
requirement,  permitting  banks  after  special  examina- 
tions to  receive  such  deposits  upon  their  general  credit, 
paying  interest  thereon  at  rates  subject  to  the  discretion 
of  the  Secretary.  He  also  recommended  provision  by 
law  for  the  exchange  of  gold  for  silver  dollars,  the  use 
of  the  silver  bullion  on  hand  for  subsidiary  coinage,  and 
requiring  national  banks  to  redeem  their  notes  in  gold. 
The  change  of  sentiment  following  the  evolution  of 
business  is  well  illustrated  by  the  fact  that  Secretary 
Shaw  recommended  depositing  government  money  with 
the  banks  at  interest,  when  so  many  of  his  predeces- 
sors prior  to  1878,  as  well  as  comptrollers  of  the  cur- 
rency, had  urged  that  banks  be  prohibited  by  law  from 
paying  interest  on  deposits. 

The  need  of  giving  our  currency  elasticity  in  average 
conditions  is  generally  recognized,  and  the  necessity  of 
relieving  its  rigidity  so  the  banks  can  afford  relief  and 
preserve  values  in  time  of  panic  seems  to  be  fully  ap- 
preciated. For  this  reason  I  have  set  forth  in  much 
detail  the  principal  schemes  of  currency  reform. 

As  has  been  stated,  the  British  government  adopted  Policy  of 
a  monetary  policy  for  India  which  prohibited  the  coin-  japan. 
age  of  silver  except  on  government  account,  and  silver 
coin  was  made  exchangeable  at  a  fixed  ratio,  approxi- 
mately 32  to  1,  which  corresponded  with  the  commercial 
ratio,  silver  having  fallen  to  64 £  cents  per  ounce.  Japan 
adopted  a  similar  policy,  and  minor  countries  followed 
these  examples,  leaving  the  sole  outlets  for  silver  un- 
hampered by  law,  the  Oriental  silver  standard  countries 
of  China,  Straits  Settlements,  and  the  Philippines.  Since 
the  latter  islands  have  come  under  the  control  of  the 
United  States,  the  gold  standard  with  silver  coinage  on 


410  CONTEST  FOR  SOUND   MONEY 

government  account  has  been  decreed  by  the  act  of  Con- 
gress March  2,  1903. 
Fixed  ratio  Mexico  is  a  large  producer  of  silver,  it  constituting 

for  silver  ,  ..,  ,  .       .  ,.  , 

countries.  her  principal  export,  and  is  therefore  greatly  interested 
in  arresting  its  further  depreciation.  Her  silver  piasters 
have  for  over  a  century  been  the  favorite  coins  of  the 
Orient,  and  their  exportation  and  further  use  is  threat- 
ened by  the  political  and  other  changes  in  the  Philip- 
pines and  China.  Mexico,  for  this  reason,  instituted 
negotiations  for  an  international  agreement,  between  the 
countries  having  colonial  possessions  where  silver  is  in 
use,  to  establish  a  stable  ratio  if  possible  between  the 
two  metals.  China,  the  principal  silver-using  country 
at  this  time,  joined  Mexico,  and  the  United  States,  having 
regard  for  the  interests  of  the  Philippines  and  having 
important  silver-producing  interests,  has  undertaken  to 
aid  in  this  movement ;  and  for  this  purpose  a  commission 
composed  of  Messrs.  H.  H.  Hanna,  C.  A.  Conant,  and 
J.  W.  Jenks  were  sent  abroad  to  confer  on  the  subject 
with  the  nations  concerned  in  the  hope  that  a  practical 
solution  of  this  problem  of  eliminating  the  violent  fluc- 
tuations in  the  price  of  silver,  which  upset  all  exchange 
calculations,  may  be  arrived  at. 

Data  relating  to  Banks  June,  1903 

Statistics,          Number  of  national  banks 4939 

June,  1903.       Capital 744  millions 

Circulation  covered  by  bonds 372  millions 

Circulation  covered  by  lawful  money         ....  41  millions 

Deposits 3348  millions 

Loans 3415  millions 

Cash 552  millions 

Two  per  cent  bonds  held  to  secure  notes          .         .         .  367  millions 

Other  bonds  so  held 8  millions 

Total  resources  of  national  banks 6287  millions 

Money  in  circulation 237°  millions 

Per  capita $29.39 

Public  moneys  in  banks 152  millions 


REFORM  ACT  OF  1900 


411 


STATISTICAL   RESUME 
(Amounts  in  millions) 
National  Finances 


Fiscal 

Revenue 

Expenditures 

+  SUR 
PLUS 

-Def- 
icit 

Debt 

Price  of 
4%'s  of  1907 

Year 

Cus- 
toms 

Other 

Total 

Ordi- 
nary 

Inter- 
est 

Total 

Out- 
standing 

+  In- 
crease 
-  De- 
crease 

High 

Low 

1897 
1898 
1899 
1900 
1901 
1902 
1903 

177 

>5° 
206 

233 
239 
254 
284 

I7I 

255 
3IO 

334 
349 
308 

275 

348 
405 

516 

567 
588 

562 

559 

328 
406 

565 
448 

478 

442 
477 

38 

37 
40 
40 
32 
29 
29 

366 

443 
605 
488 
5io 
47i 
506 

-18 
-38 
-89 
+  79 
+  78 
+  9i 
+  53 

1227 
1233 
1437 
1413 
1372 
1328 
1309 

-  4 
+     6 
4-204 

-  24 

-  4i 

-  44 

-  19 

"5 

114? 

«5i 

118J 

"5$ 

"3 

Mlf 

108 

112 

114 

112 

io8f 

Circulation 


< « 

s 

0 

0 

M 

Id 

> 
-J 

> 

-  u 

a  - 

H{/3 

VI 

Id 
(- 
O 

to 

> 
5  u 

h<  0 

<—  as 

< 

> 

■ 

B 

Z  "> 

Id 
BS 

z 

0 

3 

OS 

</3 

£> 

H 

2 

H 

(2 

H 

Ah 

1897  • 

696 

442 

76 

347 

"5 

230 

1906 

266 

1640 

72 

J?22.87 

1898  . 

862 

46O 

76 

347 

IOI 

228 

2074 

236 

1838 

73 

*5-»5 

1899  . 

963 

470 

75 

347 

94 

241 

2190 

286 

1904 

74 

25.58 

1900  . 

1036 

491 

83 

347 

75 

310 

2342 

279 

2063 

76 

26.94 

1901    . 

1 125 

520 

90 

347 

48 

354 

2484 

306 

2178 

78 

27.98 

1902   . 

1 189 

540 

97 

347 

30 

356 

2559 

312 

2247 

79 

28.43 

1903  . 

1253 

554  i°i 

347 

19 

4i3 

2688 

312 

2376 

80 

2939 

1  Including  certificates. 


412 


CONTEST  FOR  SOUND  MONEY 


Exports  and  Imports  and  Gold  Movement 


Merchandise 

Silver 

Gold 

«»3 
*•  s  0 

^  Q 

B 
M 

Q 

Fiscal 
Year 

0 
0. 

X 

W 

0 
a. 

6 

8  ° 

X  & 

0 
0. 

X 

W 

0 
0. 
| 

H  0 
x  g- 

W(3 

0 

Bk 

X 

W 

0 
0. 

V   8  H 

1  + 

O 
O 

h 
it 

I897 

105 1 

765 

286 

63 

3i 

32 

40 

85 

+  45 

78 

141 

1898 

1231 

616 

615 

56 

3i 

25 

16 

120 

+  104 

25 

167 

1899 

1227 

697 

53° 

57 

3i 

26 

38 

89 

+  5i 

26 

24I 

I900 

1394 

850 

544 

57 

35 

22 

48 

45 

-  3 

36 

221 

1901 

I488 

823 

665 

64 

36 

28 

53 

66 

4-  13 

24 

249 

1902 

1382 

903 

479 

50 

28 

22 

49 

52 

+  3 

19 

254 

1903 

1420 

1026 

394 

44 

24 

20 

47 

45 

—  2 

36 

252 

Production  of  Gold  and  Silver 


World 

United  States 

M 
■ 

> 

b 
O 

H 

u 
B 

0 

9 

0  H 

Year 

Gold 

Silver 

Gold 

Silver 

S3 

."2 

s  ~s 

0 
0 

Is 

0  > 

"a 

1  «i 
B  "n 

e> 

0 

0 

.5  3 
.=  ■« 
0  > 
O 

Z  M 

O  M 
"  J 

1897 

236 

96 

207 

57 

32 

70 

$.60483 

34.20 

$.467 

1898 

287 

100 

219 

64 

32 

70 

.59010 

35  -°3 

•456 

1899 

307 

101 

217 

71 

33 

71 

.60154 

34.36 

•465 

1900 

255 

107 

223 

79 

36 

75 

.62007 

33-33 

•479 

1901 

263 

105 

226 

79 

33 

7i 

•59595 

34-68 

.461 

1902 

81 

30 

76 







REFORM  ACT  OF  1900 
Silver  Statistics 


413 


Fiscal  Year 

5r  « 

0  as 

8 

•J  a 
oO 
O 

B 
P 

K  < 

g  y  h 

■ 

0 

Net  Silver  in  the 
Treasury 

Dollars 

Bullion 

1897.  •  • 

1898  .  .  . 

1899  .  .  . 

1900  .  .  . 

1901  .  .  . 

1902  .  .  . 

13 

14 

*5 
25 
24 

23 

442 

456 
47i 
496 
520 
543 

52 
58 
6l 
66 
67 
69 

358 
390 
402 
408 
430 
447 

32 
12 

7 
16 

24 
25 

105 
98 

85 
70 

48 

33 

National  Banks 
(at  dates  nearest  January  i) 


Year 

Number 

Capital 

Surplus 

Deposits 

Circula- 
tion 

Specie 

Legals 

Loans 

1897 

3661 

647 

247 

1655 

211 

226 

156 

1901 

1898 

3607 

630 

246 

1961 

194 

252 

159 

2IOO 

1899 

359° 

621 

247 

2319 

207 

329 

136 

2214 

1900 

3602 

607 

250 

2461 

205 

315 

"5 

2480 

1901 

3942 

632 

262 

2718 

299 

360 

142 

2707 

1902 

4291 

665 

287 

3074 

319 

37° 

l5l 

3038 

1903 

4766 

731 

351 

3308 

335 

418 

lS3 

3351 

Other  Banks 


State  Banks 

Total  Resources 

Year 

1 

3 
Z 

2 
'a 
a 

a 

3 

3 
t/3 

a 
1 

V 

0 

c3 

■ 

to  S 
3  n 

G  a. 

h  e 

q 
O 

I  S 

Si" 

.5  e 
>  a 
<•  — 

VI 

1897 

3857 

229 

77 

724 

'45 

670 

844 

78 

2199 

1898 

3965 

234 

81 

912 

144 

814 

943 

91 

224I 

1899 

4191 

233 

77 

1 164 

217 

909 

1072 

88 

24OI 

1900 

4369 

237 

9i 

1267 

202 

1030 

1380 

127 

2625 

1901 

4983 

255 

104 

1611 

310 

1 184 

1615 

149 

2757 

1902 

5397 

277 

in 

1698 

228 

1346 

1983 

160 

2893 

414 


CONTEST  FOR  SOUND  MONEY 


Miscellaneous  Financial 


Clearing-houses 

Savings  Banks 

Failures 

Year 

New 
York 

United 
States 

Depositors 

(ooo's) 
1 

Deposits 

(Millions) 

Average 

Number 
(ooo's) 

Liabilities 
(Millions) 

1897 

31.338 

54, 1 80 

5201 

1939 

373 

13 

154 

1898 

39,853 

65,925 

5386 

2066 

384 

12 

131 

1899 

57.368 

88,829 

5688 

2230 

392 

9 

91 

1900 

S1.^ 

84,582 

6107 

2450 

401 

II 

138 

1901 

77,021 

114,190 

6359 

2597 

408 

II 

"3 

1902 

74,753 

Il6,022 

6667 

2750 

412 

12 

117 

Banking  Power  by  Sections 

(Including  Capital,  Surplus,  Undivided  Profits  and  Deposits) 

As  given  in  reports  of  Comptroller  of  Currency 


Banking  Power 
(In  millions) 

Per  Capita 

States 

1890 

1900 

1902 

1890 

1900 

1902 

New  England     . 

1229 

1728 

2052 

fc6l.86 

#312.30 

#354-86 

Eastern     .     .     . 

2410 

4281 

6233 

1 70.92 

251.10 

351-37 

Middle      .     .     . 

I055 

1808 

307I 

54-59 

75.00 

128.72 

Southern  .     .     . 

387 

552 

844 

21.15 

24.94 

36.88 

Western    .     .     . 

2l8 

306 

480 

54-83 

60.16 

89.94 

Pacific  .... 

315 

467 

640 

139- 15 

147.01 

197-58 

All     .     .     . 

5614 

9142 

13,320 

89.85 

118.73 

168.96 

In  this  table  the  Pacific  states  are  separated  from  the  Western ;  but 
Kansas  and  Nebraska,  heretofore  included  in  Central  class,  are  here  in- 
cluded as  Western.  The  designation  of  sections  as  employed  by  the 
Comptroller  has  been  retained. 

The  population  for  1900  was  estimated  and  considerably  exceeded  the 
census  figures;  that  for  1902  is  estimated  on  basis  of  census  of  1900,  and 
is  more  nearly  correct.  The  result  is  that  the  per  capita  for  1900  is  less 
than  it  should  be. 


CHAPTER   XIX 
General  Review 

A  general  review  of  the  monetary  history  of  the 
entire  period  of  our  national  existence  shows  that  each 
generation  had  to  learn  for  itself  and  at  its  own  expense 
the  evils  of  unsound  money.  The  costly  experiences  of 
the  preceding  generation  were  generally  forgotten,  and 
legislators,  following  rather  than  leading  the  people, 
failed  to  correct  the  evils  except  after  long  and  disas- 
trous delays.  So  intolerable  were  the  conditions  at 
times  that  only  the  unlimited  recuperative  powers  of 
our  rapidly  developing  and  expanding  country  pre- 
vented the  overthrow  of  that  standard  of  value  and 
honor  which  is  recognized  by  the  world  as  highest  and 
best. 

The  problem  of  furnishing  a  sound  and  stable  medium  Difficult 
for  a  country  of  such  large  area,  of  such  diverse  inter- 
ests, developing  at  an  unprecedented  rate,  presents  un- 
usual difficulties,  and  no  precedent  is  furnished  by  any 
other  country  with  kindred  conditions  and  analogous 
experience.  Principles  remain  the  same,  however,  and 
the  obstacles  could  have  been  overcome  and  all  questions 
properly  solved  had  not  political  ambitions  and  party 
advantage  exercised  such  a  controlling  influence.  The 
questions  confronting  us  to-day  are  in  many  respects 
the  same  that  have  existed  throughout  our  history, 
namely,  the  establishment  of  a  coinage  and  currency 
system  which  will  assure  stability  as  to  metallic  money, 
security  and  flexibility  to   paper  currency,  to   the  end 

415 


41 6  CONTEST  FOR  SOUND  MONEY 

that  prices  may  not  be  subject  to  ruthless  disturbances 
and  interest  rates  be  reasonably  uniform  and  equitable 
throughout  the  land. 

The  coinage.  The  bimetallic  theory,  however  logical  in  the  days  of 
Hamilton,  when  the  production  of  precious  metals  was 
but  small  and  the  greater  part  of  the  civilized  world 
preferred  silver  to  gold,  has  been  demonstrated  impos- 
sible of  realization  without  substantially  universal  adop- 
tion, which  has  been  shown  equally  impossible.  As  a 
practical  question  bimetallism  is  for  this  generation  at 
least  a  moribund  issue.  Whether  the  enormous  produc- 
tion of  gold  shall  ultimately  impair  its  desirability  as  a 
standard  of  value  or,  what  is  more  likely,  cause  the  evo- 
lution of  entirely  novel  theories  of  money,  is  a  question 
too  remote  to  have  any  present  utility. 

Hamilton's  writings,  his  careful  study  of  the  subject, 
with  the  end  always  in  view  of  giving  his  country  a  just 
measure  of  values,  show  clearly  that  to-day  he  would 
favor  a  standard  resting  upon  gold  alone ;  nor  is  it  to 
be  doubted  that  Jefferson  would  maintain  equally  sound 
and  conservative  views.  The  statistics  presented  show 
that  immediately  after  the  adoption  of  Hamilton's  coin- 
age law  the  production  of  silver  increased  largely,  dis- 

The  question  turbing  the  commercial  ratio  between  gold  and  silver. 
According  to  Hamilton's  theory,  this  should  have  been 
followed  by  a  change  in  the  coinage  ratio  as  early  as 
1810.  In  1834,  when  such  action  was  taken,  the  intelli- 
gent opinion  of  the  day  was  ignored  and  an  extreme 
ratio  adopted  which  reversed  rather  than  corrected  the 
disparity  by  undervaluing  silver.  Within  a  decade 
the  great  increase  in  gold  production  had  enhanced  the 
relative  value  of  silver,  and  all  coins,  fractional  silver  as 
well,  were  exported.  To  correct  this  and  retain  small 
coins  for  current  use  the  law  of  1853  was  passed,  reduc- 
ing the  amount  of  fine  silver  in  fractional  coins. 


GENERAL  REVIEW  417 

The  relatively  scant  product  of  the  white  metal  for  The  silver 
the  following  twenty  years  served  to  demonstrate  the 
wisdom  of  the  law  of  1853.  Unfortunately  the  legisla- 
tors of  that  day  left  the  silver  dollar  unit  undisturbed, 
and  when  silver  was  again  produced  in  larger  quanti- 
ties (after  1874)  the  existence  of  the  law  of  1837  gave 
the  advocates  of  free  coinage  of  silver  a  precedent  and 
prestige  which  would  not  otherwise  have  existed.  The 
act  of  1900  leaves  the  legal  tender  power  of  the  dollar 
of  371.25  grains  of  pure  silver  exactly  as  provided  in  the 
acts  of  1792  and  1837,  except  where  otherwise  ex- 
pressly provided  in  the  contract. 

It  is  only  necessary  to  recapitulate  the  silver  legisla-  The  silver 

....  c     ,  ,  .  acquisition 

tion  since  the  beginning  of  the  agitation  for  remonetiza-  since  1878. 
tion  in  1876,  in  order  to  appreciate  the  bearing  of  the 
enormous  acquisition  of  silver  by  the  United  States  and 
the  possible  menace  which  its  possession  involves.  The 
silver  purchased  under  the  laws  of  1878  and  1890 
amounted  to  459,946,701  fine  ounces,  costing  us 
$464,210,262,  an  average  per  ounce  of  nearly  $1.01, 
parity  being  $1.2929.  The  price  of  silver  (December, 
1902)  was  quoted  as  low  as  46  cents  per  ounce,  giving  a 
bullion  value  to  the  silver  dollar  of  less  than  40  cents. 
The  silver  dollars  coined  amount  to  $550,000,000,  and  the 
bullion  still  uncoined  will  produce  some  $35,500,000 
more,  giving  an  ultimate  total  of  $585,500,000.  The 
actual  use  of  silver  dollars  in  circulation  will  probably 
never  exceed  one  per  capita,  now  about  80,000,000. 
The  remainder  will  be  represented  by  silver  certificates 
or  remain  absolutely  idle  in  the  Treasury  so  far  as  cur- 
rency purposes  are  concerned. 

The  entire  volume  of  silver  and  representative  certifi-  influence  of 

,  ...       ,    r  ,  ,  .  .,    silver  on 

cates  may  be  utilized  for  the  great  and  growing  retail  currency 
trade  of  the  country  so  long  as  business  conditions  are  system, 
prosperous,  the  labor  of  the  country  is  employed,  and  the 


418  CONTEST  FOR  SOUND  MONEY 

consuming  power  continues  unabated  ;  but  the  contrary 
will  follow  when  reaction  takes  place  and  business  again 
becomes  stagnant.  The  sole  available  means,  in  that 
event,  of  avoiding  danger  from  this  element  in  our 
money  supply  is  the  continuation  of  our  large  Treasury 
surplus  into  which  the  redundant  silver,  for  which  there 
will  be  no  use  as  currency,  may  be  absorbed. 

Paper  Passing  now  to  the  paper  representatives  of  money,  we 

have  first  to  consider  the  gold  and  silver  certificates 
which  constitute  a  form  of  currency  not  made  use  of  in 
other  countries.  While  at  first  gold  certificates  were 
permitted  to  be  issued  in  excess  of  the  gold  deposited 
(law  of  1863),  the  more  recent  laws  governing  their 
issue,  as  also  in  the  case  of  silver  certificates,  require 
that  the  full  amount  of  coin  shall  be  held  against  them. 
Both  forms  of  certificates  are,  therefore,  merely  ware- 
house receipts,  and,  although  receivable  for  all  public 
dues  and  available  for  bank  reserves,  they  are  not  legal 
tenders.  Gold  certificates  as  compared  with  coin  save 
in  transportation  as  well  as  in  abrasion,  and  cater  to  a 
public  preference  for  paper  money.  The  silver  certifi- 
cates serve  a  similarly  useful  purpose  in  floating  the 
silver  dollars  ;  their  use  has  thus  unquestionably  en- 
abled the  advocates  of  silver  to  load  the  currency  with 
an  amount  of  dollars  far  beyond  all  needs  and  perhaps 
beyond  the  point  of  safety. 

Legal  We  have  seen  that  the  "  fathers  "  intended,  without 

specifically  embodying  a  prohibition  to  that  effect  in  the 
Constitution,  to  prevent  the  issue  of  governmental  legal 
tender  paper,  and  a  tacit  understanding  that  no  such 
power  existed  guided  legislators  for  seventy-three  years. 
In  the  evolution  of  government  the  conception  of 
federal  power  under  the  Constitution  was  broadened,  and 
found  enlarged  expression  in  legislative,  executive,  and 
judicial  action.     The  perils  and  necessities  of  the  gov- 


GENERAL  REVIEW  419 

ernment  during  the  Civil  War  broke  the  barriers  of  the 
strict  constructionists,  and  the  powers  which  a  sovereign 
government  needed  to  exercise  were  held  to  be  warranted 
by  the  Constitution  except  where  specifically  prohibited. 
Relying  upon  the  opinions  expressed  in  debate,  it  is  safe 
to  assert  that  Congress  believed  the  legal  tender  act  of 
1862  unconstitutional  when  they  voted  that  it  become  a 
law.  They  were  willing  to  adopt  revolutionary  means  to 
overcome  revolution.  The  Rubicon  once  passed,  this 
law  furnished  a  precedent  for  others  to  follow.  The 
Supreme  Court  in  its  first  decision  held  the  law  in  large 
part  unconstitutional.  The  second  decision  reopened  the  TheSupr 
case,  and  held  that  Congress  had  power  to  issue  legal  decisions 
tender  notes  "for  the  time  being,"  having  reference  to 
the  perils  of  the  government  in  the  exigency  of  war. 
Upon  the  third  hearing  in  1884  the  Court  held  that 
giving  the  legal  tender  quality  to  paper  was  a  sovereign 
power,  exercisable  in  time  of  peace  as  well  as  in  time  of 
war,  in  the  discretion  of  Congress. 

The  right  to  issue  bank-notes  was  made  use  of  by  Apparen 
the  few  banks  existing  prior  to  the  adoption  of  the  Con- 
stitution as  a  common  law  right.  The  banks  in  the 
several  states  continued  to  exercise  this  right  after  the 
adoption  of  the  Constitution,  under  their  state  charters, 
whether  specifically  authorized  or  not.  It  was  generally 
admitted  that  such  rights  existed,  that  the  states,  although 
prohibited  from  issuing  bills  of  credit  to  be  used  as 
money,  could  charter  corporations  with  such  powers. 
This  granting  to  their  own  creatures  powers  which  the 
states  did  not  themselves  possess  was  assented  to  and 
finally  confirmed  as  constitutional  by  the  Supreme 
Court.  Antecedent  thereto  Hamilton  devised  the  char- 
ter of  the  first  Bank  of  the  United  States,  and  as- 
sumed for  the  federal  government  a  similar  power, 
that  of  creating  a  corporation  to  emit  paper  to  circulate 


legal  tenders. 


420  CONTEST  FOR  SOUND  MONEY 

Broad  con-  as  money,  which  it  was  generally  held  at  that  time  the 
government  itself  could  not  do  under  the  Constitution. 
Marshall  in  his  masterly  decision  on  the  charter  of  the 
second  Bank  of  the  United  States  confirmed  the  federal 
power  to  create  such  a  bank,  and  enunciated  principles 
in  construing  the  Constitution  which  became  the  foun- 
dation for  the  broader  assumption  of  power  in  the  legal 
tender  acts  of  the  Civil  War. 

Statistics  of  The  volume  of  legal  tender  notes  of  the  war  period 
continue  as  they  stood  in  1878,  after  the  law  forbidding 
their  further  retirement,  at  $346,681,016,  less  such  as 
have  been  lost  or  destroyed.  Those  issued  under  the 
act  of  1890  are  gradually  being  retired  by  substitution  of 
silver  certificates,  only  $24,000,000  remaining  in  exist- 
ence, December,  1902.  Aside  from  the  enormous  cost  to 
the  people  through  the  depreciation  of  this  currency,  the 
maintenance  of  coin  redemption,  since  resumption  was 
determined  upon,  has  resulted  in  bond  issues,  in  order  to 
obtain  gold  amounting  to,  1875-1879,  $95,000,000  and, 
1 894- 1 896,  to  $262,300,000,  together  with  the  interest 
thereon. 

In  order  to  be  able  to  redeem  these  notes  upon  pre- 
sentation, $357,300,000  of  interest-bearing  bonds  of  the 
government  have  been  issued,  which  the  people  have 
paid  or  must  pay.  Compare  the  amount  of  these  bond 
issues  with  the  amount  of  legal  tender  notes  outstanding 
(greenbacks),  $346,681,016,  and  instead  of  being  a  "  bur- 
denless  debt "  and  the  "  best  currency  ever  devised," 
it  would  seem  pregnant  with  burden  as  well  as  danger. 
These  notes  when  presented  for  redemption  and  paid 
are  not  cancelled  but  reissued,  and  continue  to  possess 
all  potentiality  of  further  drain  upon  the  Treasury. 
Experience  in  1893-1896  teaches  that  continuous  deficits 
in  revenue  will  inevitably  render  the  existence  of  these 
notes  an  element  of  danger.     Congress  seems  to  have 


GENERAL  REVIEW  421 

realized  this  and  sought  to  guard  against  it  by  establish-  Bond  issues 
ing  a  gold  reserve  of  $150,00x3,000.  Should  the  usual  reserve, 
banking  methods  for  maintaining  the  reserve  prove 
unavailing,  the  act  provides :  if  "  said  fund  shall  at  any 
time  fall  below  $100,000,000,  then  it  shall  be  his  (Secre- 
tary of  the  Treasury)  duty  to  restore  the  same  to  the 
maximum  sum  of  $150,000,000  by  borrowing  money  on 
the  credit  of  the  United  States,"  etc.  With  this  power 
lodged  in  the  hands  of  the  Secretary  and  this  duty  im- 
posed upon  him,  there  can  be  no  doubt  of  the  redemp- 
tion of  these  notes  in  gold  so  long  as  gold  can  be  bor- 
rowed on  the  credit  of  the  United  States.  The  danger 
is  that  still  further  bonded  indebtedness  may  have  to  be 
incurred  on  account  of  them. 

Ninety  per  cent  of  silver  certificates  are  now  limited  Denomina- 

m  m       m  1    .*       •  xi  1  tional  restric- 

to  $10,  $5,  $2,  and  $1  issues.  Legal  tender  notes  are  tions. 
limited  to  $10  minimum.  Only  one-third  of  the  notes 
issued  to  a  national  bank  can  be  of  the  denomination  of 
$5.  All  other  notes  must  be  $10  and  upwards.  Silver 
is  by  law  made  the  only  available  currency  for  the  small 
everyday  transactions  of  the  people  which  are  so  largely 
effected  by  actual  money  rather  than  by  auxiliary  credits. 
Silver  is  thus  laid  under  contribution  to  perform  the 
daily  exchanges  of  the  workaday  world,  and  cannot 
leave  its  task  either  directly  or  indirectly  to  aid  in  with- 
drawing gold  from  the  Treasury.  It  is  chained  to  the 
wheels  of  industry.  The  volume  of  currency  which  may 
be  thus  safely  impounded  by  an  active  commercial  peo- 
ple, already  numbering  80,000,000  and  rapidly  increas- 
ing, is  certainly  very  large,  and  since  the  volume  of 
silver  is  no  longer  increasing,  it  is  probable  that  except  The  silver 
under  extraordinary  conditions  the  gold  standard  has  m^f^ed. 
little  to  fear  from  the  present  amount  of  silver  currency, 
and  it  is  believed  that  whatever  danger  exists  would  be 
removed  or  at  least  greatly  reduced  by  making  silver 
and  gold  interchangeable. 


422  CONTEST  FOR  SOUND   MONEY 

Les^1  The  prejudice  or  preference  of  the  American  people 

tenders  r  r     '  ,     ,  ,  r 

impounded.  f°r  paper  money  precludes  the  use  of  coin  except  to  a 
very  limited  extent.  Bank-notes  and  the  gold  and  sil- 
ver certificates  perform  all  the  essential  functions  of 
money,  except  that  they  do  not  possess  the  debt-paying 
power  —  are  not  legal  tenders.  Our  widely  extended 
country,  with  many  commercial  and  business  centres, 
requires  a  considerable  volume  of  legal  tender  money. 
The  custom  which  avoids  the  use  of  coin  makes  a  con- 
tinual use  for  legal  tender  notes.  A  very  large  amount 
is  continually  in  use  for  bank  reserves.  These  notes 
are  better  than  gold  certificates,  for  while  they  are  both 
redeemable  in  gold  at  the  Treasury,  the  notes  may  be 
tendered  to  and  forced  upon  a  creditor  in  satisfaction 
of  his  debt.  The  issue  of  currency  certificates,  in 
denominations  of  $5000  and  $10,000  for  legal  tender 
notes  deposited,  was  designed  to  furnish  a  currency, 
convenient  in  form  and  size,  to  enable  the  banks  in 
large  cities  to  settle  their  clearing-house  balances, 
which  in  New  York  City  frequently  amount  to  several 

Gold  reserve  millions.     They  proved    an   equally  convenient   instru- 

protected.  ,.  .  ,    ,  .  ,..,_, 

mentality  for  withdrawing  gold  from  the  Treasury.  It 
was  easy  to  present  them  and  demand  notes,  and  then 
present  the  notes  and  demand  gold.  Such  certificates 
are  no  longer  issued,  Treasury  gold  certificates  and 
clearing-house  gold  certificates  serving  the  needs  of 
the  banks.  It  will  in  future  be  much  more  difficult  to 
accumulate  legal  tenders  in  large  volume  as  a  means  of 
withdrawing  gold  from  the  Treasury  as  they,  too,  to  a 
very  large  extent,  are  kept  in  constant  demand. 

The  United  States  was  the  last  stronghold  of  silver. 
The  gold  standard  law  of  1900,  directly  in  issue  in  the 
presidential  contest  of  that  year,  and  hence  squarely 
indorsed  and  ratified  by  the  people,  indeed  settled  the 
question  in  the    United    States.     But   our  government 


GENERAL  REVIEW  423 

nursed  bimetallism,  and  sent  commissioners  abroad  to  Gold  stand- 
try  and  interest  Europe  in  the  subject,  until  their  courte-  established. 
ous  reception  depended  upon  the  character  of  the  gov- 
ernment which  sent  them  rather  than  the  subject  which 
they  represented.  All  the  great  commercial  nations 
adhered  to  the  gold  standard.  The  consensus  of  opin- 
ion of  the  civilized  world,  which  in  commerce  makes 
law  and  regulates  exchange,  adopted  the  gold  standard. 
This  fact,  borne  in  upon  the  public  mind  in  the  United 
States,  found  its  record  in  the  second  defeat  of  Bryan- 
ism,  and  this  fact,  more  potent  than  statute  law,  will 
preserve  the  gold  standard. 

When  the  federal  revenues  increase,  the  sub-  influence  of 
treasury  system  necessarily  draws  in  and  locks  up  a  treasury, 
substantial  part  of  the  available  supply  of  money,  which 
tends  to  produce  a  stringency.  As  early  as  1853  the 
Treasury  was  constrained  to  "  come  to  the  relief  of  the 
money  market "  and  return  the  surplus  money  to 
the  channels  of  trade  by  purchasing  government  bonds. 
The  precedent  thus  established  obtains  to-day.  The 
government's  obligations  have  been  purchased  at  pre- 
miums ranging  up  to  28  per  cent,  in  order  to  counter- 
act the  workings  of  the  subtreasury  system.  Could 
a  more  severe  arraignment  or  criticism  be  made  upon 
the  system  ?  The  only  other  means  of  preventing  the 
undue  absorption  of  money  by  the  Treasury  is  to  de- 
posit receipts  from  internal  revenue  in  banks.  From 
1837  until  the  establishment  of  the  national  banking  Depository 
system  (1863),  depositing  funds  with  banks  was  re- 
garded as  dangerous.  Indeed,  the  existing  system, 
under  which  the  public  deposits  are  amply  secured  by 
government  bonds,  has  been  severely  criticised,  and 
curiously,  most  severely  by  the  political  party  (Repub- 
lican) which  subsequently  made  the  largest  use  of  it. 
Such  deposits  are  limited  to  the  current  internal  revenue 


424  CONTEST  FOR  SOUND  MONEY 

receipts.  However  acute  the  stringency,  customs  re- 
ceipts could  not  be  so  deposited,  nor  money  transferred 
from  the  Treasury.  Under  present  law  customs  receipts 
must  be  paid  directly  into  the  Treasury,  and  money  once 
in  the  Treasury  can  only  be  gotten  out  by  means  of  an 
appropriation  by  Congress. 

In  no  other  civilized  country  is  there  such  an  absurd 
governmental  interference  with  the  currency  supply, 
affecting  values,  promoting  speculation,  retarding  busi- 
ness, and  disturbing  the  welfare  of  the  people. 

The  second  Bank  of  the  United  States  had  been 
drawn  into  the  maelstrom  of  party  politics  and  wrecked. 
Its  continuation  and  ignominious  failure  as  a  state 
institution  shed  reflex  disgrace  upon  the  original  bank, 
and  prevented  public  sentiment  from  turning  again  to  a 
national  bank  for  relief  as  it  did  in  1816,  during  the 
currency  demoralization  and  financial  troubles  following 
the  War  of  18 12.  The  action  of  Congress,  in  creating 
the  subtreasury  system  in  1846  and  seeking  safety  for 
its  own  funds  regardless  of  the  public,  can  be  explained 
but  not  justified ;  the  continuation  of  this  system  of 
governmental  interference  with  every  man's  business,  a 
disturbing  factor  that  must  be  reckoned  with  in  every 
business  forecast,  cannot  even  be  intelligently  explained. 
Remedy  A  law  authorizing  the  Secretary  of  the  Treasury  to 

deposit  any  and  all  funds,  over  and  above  the  reserve 
maintained  against  the  government's  legal  tender  obliga- 
tions and  his  necessary  checking  balances,  in  the  banks 
in  reserve  cities,  with  due  solicitude  for  safety  and 
prompt  repayment  whenever  required,  would  free  the 
subtreasury  system  from  its  serious  defects  and  relieve 
business  interests  from  its  malinterference.  There  is 
much  to  be  said  in  favor  of  maintaining  the  reserve 
and  current  checking  funds  in  the  government's  own 
coffers. 


proposed. 


GENERAL  REVIEW  42$ 

At  the  inception  of  our  national  existence  the  genius  Hamilton's 
of  Hamilton  conceived  a  central  bank  as  the  instrumen- 
tality through  which  the  fiscal  affairs  of  the  government 
should  be  conducted.  With  branches  established 
throughout  the  country,  the  standard  of  banking,  the 
character  of  currency  which  this  bank  established, 
became  the  criterion  by  which  all  would  be  judged. 
Other  banks  in  order  to  succeed  in  competition  had  to  be 
equally  sound,  their  notes  equally  sure  of  redemption. 
His  prescience  and  wisdom  were  vindicated  by  the 
achievements  during  the  period  of  the  first  United 
States  Bank  (1791-1811).  Public  and  private  credit 
was  raised  from  almost  unprecedented  chaos  to  a  very 
high  standard. 

The  deplorable  condition  of  both  currency  and  credit  The  second 
following  the  refusal  to  renew  the  bank's  charter,  coupled 
with  the  exigencies  of  the  War  of  18 12,  which  resulted 
in  chartering  the  second  United  States  Bank  in  18 16 
(with  the  approval  of  Madison  as  President  and  many 
others  who  had  opposed  renewing  the  charter  of  the 
first),  may  also  be  noted  to  the  credit  of  the  central  bank 
plan.  The  second  bank  was  discredited  by  corruption 
in  its  early  years,  and  weakly  and  most  unwisely  becom- 
ing embroiled  in  politics  in  its  latter  years,  suffered 
party  defeat  and  ceased  to  exist  as  a  national  institution 
with  the  expiration  of  its  charter.  Its  early  mistakes 
were  corrected,  and  for  many  years  its  career  was  most 
honorable  and  useful.  During  this  period,  the  central 
bank  system  so  regulated  the  currency  that  its  purchas-  Regulation 
ing  and  debt-paying  power  was  practically  stable  and  °  currency' 
uniform,  with  prompt  redemption  as  well  as  flexibility  of 
volume.  It  provided  safe  depositories  for  public 
moneys  and  transferred  the  same  at  little  or  no  cost, 
developed  the  use  of  bank  credits,  greatly  diminished 
the  cost  of  domestic  exchange,  and  by  means  of    its 


426 


CONTEST  FOR  SOUND  MONEY 


State  banks. 


Improved 

banking 

system. 


branches  and  general  powers  tended  to  equalize  interest 
and  discount  rates.  When  the  system  was  destroyed, 
all  the  evils,  which  had  thus  been  corrected,  reappeared 
and  continued  until  the  era  of  nationalization  which  the 
Civil  War  brought  about. 

It  must  not,  however,  be  inferred  that  all  of  the  state 
bank  systems  were  bad.  In  theory  many  were  good, 
although  in  practice  the  conservative  restraints  were  not 
generally  observed.  In  the  earlier  periods  of  our  history 
the  issuing  of  currency  was  regarded  the  principal  func- 
tion of  banks.  They  generally  had  limited  cash  capital 
and  small  deposits.  Auxiliary  currency,  checks  and 
drafts,  that  at  the  present  time  perform  over  90  per 
cent  of  the  transactions  consummated  by  the  people, 
were  little  used.  A  bank's  ability  to  accommodate  the 
public  with  loans  and  discounts  depended  very  largely 
upon  its  note-issue.  This  explains  why  the  people  so 
long  tolerated  such  enormous  issues  of  bank-notes  of 
such  uncertain  value.  In  the  newer  sections  the  curb- 
ing of  the  power  to  issue  notes  was  stoutly  resented. 
It  was  regarded  as  depriving  the  locality  of  the  life- 
blood  of  its  trade  notwithstanding  the  defective  charac- 
ter and  fluctuating  value  of  such  notes.  One  of  the 
strongest  criticisms,  and  most  effective  as  to  public  senti- 
ment, against  the  United  States  Bank  was  that  it  re- 
fused to  receive  the  notes  of  many  banks,  and  promptly 
presented  for  redemption  such  notes  as  it  did  receive, 
instead  of  paying  them  out.  As  the  country  grew  in 
population  and  wealth,  deposits  became  a  more  impor- 
tant factor,  and  checks  and  drafts  largely  superseded 
currency. 

The  national  banking  system  was  planned  to  make  a 
market  for  government  bonds  and  secured  by  such 
bonds  to  furnish  a  currency  which  should  supplant 
United  States  notes,  and  also  to  create  a  demand  and  use 


GENERAL  REVIEW  427 

for  United  States  notes  in  the  reserves  which  the  banks 
were  required  to  hold.  Such  currency  was  perfectly 
safe  but  not  at  all  responsive  to  the  varying  needs  of 
trade.  No  currency  based  upon  bond  security  can  be 
elastic.  A  bank  is  required  to  invest  as  much  or  more  Elasticity 
money  in  the  purchase  of  bonds  to  secure  circulation 
than  the  amount  of  circulation  it  is  permitted  to  issue. 
Its  ability  to  extend  accommodations  to  its  patrons  is 
thereby  limited  rather  than  increased. 

Bond  security  is  not  essential  to  a  perfectly  secured 
circulation.  One  life  insurance  company  of  the  city  of 
New  York  has  outstanding  704,567  paid-for  policies  of 
insurance  amounting  to  $1,553,628,026.  The  company 
is  remarkably  strong  and  well  managed.  All  life  insur- 
ance the  world  over  is  based  upon  mortuary  tables, 
showing  the  expectation  of  human  life  calculated  from 
statistical  experience.  The  business  is  safe  in  all  par- 
ticulars. All  fire  insurance  is  based  upon  statistical 
history  of  loss  by  fire  and  the  percentage  of  probable 
loss  calculated  therefrom.  The  business  is  safe  and 
prudently  and  wisely  conducted.  How  much  easier  to 
calculate  with  certainty  the  mortality  among  banks  and  Asset 
the  percentage  of  probable  loss,  in  view  of  supervision,  currency 
examination,  and  great  publicity,  and  the  elaborate  data 
which  they  are  required  to  furnish  !  The  statistical  his- 
tory of  the  national  banks  for  thirty-nine  years  shows  that 
a  tax  of  §  of  1  per  cent  levied  annually  upon  outstanding 
circulation  would  have  produced  an  amount  of  money 
sufficient  to  have  redeemed  the  outstanding  notes  of 
every  national  bank  that  has  failed,  without  recourse 
to  bonds  held  as  security  or  other  funds.  With  business 
certainty,  a  safety  fund  and  a  guarantee  fund  involving 
only  a  moderate  tax  can  be  provided  which  will  make 
note-issues  perfectly  safe  and  sound. 

The  experience  of  other  nations  furnishes  competent 


Currency  of 
Germany. 


Elasticity  of 
its  bank- 


Statistical 
data. 


428  CONTEST  FOR  SOUND  MONEY 

evidence  upon  the  question  of  currency.  Germany 
occupies  front  rank  among  commercial  nations,  and  her 
monetary  system  may  be  studied  with  advantage.  The 
Reichsbank  (or  Imperial  Bank)  of  Germany  at  the 
present  time  is  authorized  to  issue  M.  470,000,000  of 
uncovered  or  asset  currency.  These  notes  are  not  issued 
against  coin  or  bullion,  nor  is  any  particular  asset  or 
security  pledged  for  their  redemption,  nor  is  the  above 
limitation  inflexible.  The  bank  may  issue  circulation 
in  excess  of  its  authorized  uncovered  issue,  subject  to  a 
tax  of  5  per  cent  upon  such  excess  issue,  to  be  paid  into 
the  Imperial  Treasury,  provided  also  that  a  cash  reserve 
exclusive  of  notes  of  other  banks  be  maintained  equal 
to  one-third  of  its  notes  in  circulation.  In  the  year 
1900  the  Reichsbank  paid  to  the  Imperial  Treasury 
M.  2,517,853  on  account  of  this  5  per  cent  tax.  When- 
ever the  note-issue  exceeds  the  authorized  uncovered 
circulation,  the  tax  is  imposed  immediately  but  collected 
at  the  end  of  the  year. 

In  the  year  1900  the  note  circulation  of  the  Imperial 
Bank  was  in 

Marks 

January 1,099,677,000 

March 1,309,970,000 

May 1,090,761,000 

June 1,309,865,000 

August 1,096,006,000 

September 1,343,963,000 

November  .  1,166,141,000 

December 1,409,945,000 

The  above  figures  reflect  the  elasticity  and  flexibil- 
ity which  a  proper  currency  system  should  possess. 
During  the  year  1900,  in  March,  the  excess  circula- 
tion was  M.  238,258,000;  April,  M.  33,196,000;  June, 
M.  158,645,000.  Upon  these  amounts  a  5  per  cent  tax 
was  paid,  the  bank  rate  of  interest  being  5|  per  cent. 


GENERAL  REVIEW  429 

In  September  the  excess  circulation  was  M.  292,527,000; 
October,  M.  138,674,000  ;  November,  M.  23,067,000 ; 
and  December,  M.  355,917,000  ($84,708,246).  Upon 
these  amounts  a  tax  at  the  rate  of  5  per  cent  was 
paid.  The  bank's,  interest  rate  was  also  5  per  cent; 
thus  the  money  was  loaned  at  a  rate  of  interest  equal  to 
the  tax  which  the  bank  had  to  pay.  In  1901  the  bank 
paid  a  5  per  cent  tax  upon  excessive  circulation  during 
several  months,  while  the  bank's  rate  of  interest  was 
4|  per  cent  and  4  per  cent.  I  mention  this  to  show  that 
the  bank  derived  no  profit  from  surplus  circulation,  rather 
suffered  a  loss.  It  realized  its  advantage  in  supplying  Advantage 
public  needs  and  averting  calamity.  In  this  we  have 
illustrated  the  successful  working  of  a  currency  system 
easily  adapting  itself  to  the  varying  needs  of  a  great 
commercial  nation  and  especially  designed  to  meet  and 
master  any  emergency. 

Dunbar,  in  his  "  Theory  and  History  of  Banking," 
states  that  on  more  than  one  occasion  the  provision  for 
elasticity  in  the  German  currency  law  saved  the  nation 
from  what  would  otherwise  have  been  a  severe  spasm 
of  contraction.  It  is  the  consensus  of  opinion  of  Ger- 
man financiers  that  this  provision  enabled  them  to  pass 
through  the  commercial  and  financial  depression  dur- 
ing the  years  1900  and  1901  with  comparative  ease, 
avoiding  what  otherwise  might  have  entailed  serious 
disaster. 

The  Dominion  of  Canada  allows  its  chartered  banks  Canadian 
to  issue  circulating  notes  to  the  amount  of  their  paid-up  Currency. 
capital.1     The  note  holders  are  protected  (1)  by  a  prior 
lien  upon  the  assets  of  failed  banks,  including  the  double 
liability  of  stockholders,  and  (2)  by  a  redemption  fund 
contributed   by  each   bank   equal  to  5  per  cent   of   its 

1  In  February,  1903,  there  were  in  the  Dominion  34  banks,  with 
capital  of  #73,591,500,  circulation  #55,746,498,  and  690  branches. 


430  CONTEST  FOR  SOUND  MONEY 

average  circulation  and  under  control  of  the  Minister  of 
Finance.  Notes  of  failed  banks  draw  5  per  cent  interest 
from  the  time  of  default  until  the  administrator  adver- 
tises his  readiness  to  redeem  the  same.  Banks  are  re- 
quired to  maintain  their  notes  at  par  throughout  the 
Dominion ;  they  must  redeem  the  same  in  the  principal 
cities  of  each  province  of  the  Dominion  and  in  any 
additional  places  that  may  be  designated  by  the  Treasury 
board. 

Safety  fund.  The  safety  fund  is  accumulated  by  an  annual  tax  of 
1  per  cent  on  the  average  circulation  of  each  bank  until 
the  same  equals  5  per  cent,  and  is  thereafter  maintained 
at  that  percentage  by  such  annual  tax  as  may  be 
necessary,  not  exceeding  1  per  cent  upon  the  average 
circulation.  This  safety  fund  is  invested  in  Dominion 
securities  drawing  3  per  cent  interest,  which  is  paid  to 
the  respective  banks.  In  case  a  bank  fails,  its  notes  are 
immediately  redeemed  from  this  fund,  and  the  fund  is 
then  replenished  from  the  assets  of  the  failed  bank 
before  any  other  claim  is  paid.  There  is  no  pledged 
security  for  the  redemption  of  notes.     While  banks  may 

'Practical        issue  circulation  to  the  whole  amount  of  their  capital, 

results.  i-i  1  •         1 

during  the  year  1902,  the  circulation  at  its  maximum 
(October)  equalled  only  92.68  per  cent  of  the  capital ; 
at  its  minimum  (January)  only  71.85  per  cent  of  the 
capital.  The  flexible  range,  the  measure  of  elasticity, 
was,  therefore,  20.83  Per  cent. 

The  working  of  the  Canadian  system  furnishes  a 
valuable  object  lesson ;  expansion  and  contraction  of 
the  currency  measured  by  20.83  Per  cent  registers  the 
varying  needs  of  commerce  in  different  seasons  ;  since 
the  maximum  currency  issue  was  within  the  total  amount 
authorized,  the  needs  of  commerce  and  trade  must  have 
been  fully  supplied.  There  have  been  but  three  bank 
failures  in  Canada  since  1890.     Note  holders  were  paid 


GENERAL  REVIEW  431 

in  full,  and  the  redemption  fund  fully  restored  from  the 
assets  of  the  failed  banks. 

The  Canadian  banking  system,  unlike  ours,  requires  °ther 
no  reserve  against  deposits  and  no  governmental  inspec- 
tion, although  elaborate  data  are  required  to  be  furnished 
by  means  of  verified  monthly  reports.  It  has  borne  the 
test  of  experience,  and  furnishes  good  evidence  that  a 
currency  may  be  both  safe  and  elastic  without  pledged 
security  for  its  redemption,  while  our  experience  proves 
that  circulation  secured  by  bonds  may  be  perfectly  good, 
but  cannot  be  elastic. 

As  the  government's  credit  improved  after  the  war  Our  national 
and  the  premium  upon  bonds  increased,  it  became  more 
profitable  to  sell  bonds  and  retire  circulation,  and  the 
banks  increased  their  loanable  funds  by  so  doing.  For 
this  reason  bank  circulation  decreased  at  a  period  when 
the  friends  of  sound  money  hoped  it  would  increase  and 
thereby  aid  in  retiring  the  greenbacks.  An  opposition 
to  the  national  banking  system  existed  not  unlike  that 
which  developed  against  the  two  United  States  banks 
in  intensity  and  virulence.  This  opposition  championed 
first  the  greenbacks  and  later  silver.  The  system  had 
to  struggle  for  existence,  and  received  little  considera- 
tion and  no  indulgence  in  respect  to  note-issues.  As 
banks  of  discount  and  deposit,  the  growth  of  the  system 
is  simply  marvellous.  It  is  preeminently  the  best  and 
safest  system  of  local  banks  which  the  country  has  ever 
possessed,  made  secure  and  homogeneous  by  means  of 
federal  supervision  and  comprehensive  publicity.  It  has  utility 
elevated  the  general  credit,  very  materially  reduced  system. 
the  cost  of  domestic  exchange,  furnished  circulation 
at  par  throughout  the  country,  proved  a  competent  and 
efficient  auxiliary  to  trade,  and  paid  large  tribute  to  the 
Treasury  for  the  privilege  of  so  doing. 


Statistics. 


Basis  for 
reform. 


432  CONTEST  FOR  SOUND  MONEY 

Exhibit  of  Growth  of  National  Banks  expressed  in  Millions 


October 

Number 

Capital 

Surplus 

AND 

Profits 

Loans 

Deposits 

Circula- 
tion 

Total 
Re- 
sources 

1863     . 

66 

7 



5 

8 



l7 

1873     • 

1976 

491 

175 

944 

623 

339 

1831 

1883     . 

2501 

5io 

203 

1309 

1049 

3" 

2373 

1893     • 

3781 

679 

35° 

1844 

145* 

183 

3110 

1902     . 

4601 

706 

496 

3280 

3209 

317 

6113 

This  exhibit  is  the  most  remarkable  that  the  world 
has  to  show  of  financial  institutions  operating  under 
identical  charters  and  single  supervision. 

The  taxes  paid  to  the  United  States  during  the  exist- 
ence of  the  system  amount  to  $90,419,398.  In  addition 
they  paid  large  amounts  to  the  states  where  located. 

The  statistics  of  insolvency  show  as  follows :  — 

Failures  of  National  Banks 
(Amounts  in  millions) 


Period 

Number 

Capital 

Claims 
Proved 

Paid 

Per  Cent 
Paid 

1864  to  1873  .     . 
1874  to  1883  .     . 
1884  to  1893  •     • 
1894  to  1902  .     . 

34 

55 
'161 

156 

8.2 
II.7 
24.6 
23.2 

14.8 
18.9 

54-5 
51.2 

IO.6 

13-5 
37-6 

35-3 

71.6 
71.4 
69.O 
69.0 

Total  .     .     . 

406 

67.7 

139-4 

97.0 

69.6 

The  circulating  notes  were  of  course  paid  in  full  upon 
presentation,  and  the  assets  were  not  entirely  distributed. 

In  short,  as  a  system  of  banking  institutions  its  value 
cannot  be  overestimated,  and  its  imperfections  are  at- 
tributable to  conditions  not  inherent  in  the  system,  but 


GENERAL  REVIEW  433 

due  to  legislative  errors  of  omission  or  commission.  It 
is  wise  for  those  who  aim  to  give  the  country  a  model 
system  to  endeavor  to  graft  upon  this  great  establish- 
ment a  note-issuing  function  which  will  provide  a  sound, 
safe,  elastic  currency,  free  from  the  defects  which 
experience  has  shown  exist. 

The  establishment  of  a  central  or  United  States  bank  Probable 

.  r  lines  for 

at  the  present  or  in  the  near  future  is  altogether  1m-  reform, 
probable  and  perhaps  altogether  undesirable.  The 
existing  national  banks,  so  far  as  their  note-issuing 
function  is  concerned,  can  be  sufficiently  welded 
together  by  uniform  law  and  central  supervision  to 
make  them  practically  one  institution.  Circulation  can 
be  made  uniform  and  national  in  character,  good  beyond 
peradventure  by  means  of  a  redemption  fund  and  a  guar- 
antee fund,  easily  convertible  by  central  redemption, 
sufficiently  elastic  to  respond  to  the  varying  needs  of 
trade  by  basing  the  same  in  whole  or  in  part  upon  assets  Federatlon 
or  credits,  and  by  graduated  taxation  the  volume  may  be  centraiiza- 
made  to  contract,  in  order  to  avoid  speculative  redun-  tlon- 
dancy.  In  short,  it  can  be  made  safe,  convertible,  elastic. 
All  this  can  be  done  as  well  as  with  a  United  States 
bank.  In  fact,  the  whole  system  would  amount  practi- 
cally to  one  bank  so  far  as  note-issues  are  concerned  and 
at  the  same  time  by  preserving  the  individuality  of  the 
different  banks  would  leave  to  the  various  localities 
the  individual  enterprise,  local  pride,  and  efficiency  of 
management  born  of  local  knowledge,  which  is  a  con- 
sideration of  paramount  importance  in  a  country  of  such 
wide  extent  and  diversified  interests  as  ours. 

The  labor  of  the  past  becomes  the  experience  of  the 
present  and  the  habit  of  the  future.  Problems  once 
solved  and  labor  once  satisfactorily  done,  we  meet  the 
same  questions  and  the  same  labor  as  they  recur,  and 
solve  them  in  the  same  way  intuitively  and  without  con- 
2  F 


434  CONTEST  FOR  SOUND  MONEY 

scious  mental  effort.  Guided  by  knowledge  born  of 
experience,  the  greater  portion  of  our  day's  doings  are 
mechanical,  perfunctory.  Were  we  compelled  to  fix  our 
mental  attention  upon  each  act  we  perform  and  ask  and 
answer  the  question,  "  How  shall  this  be  done  and 
why  ? "  we  would  experience  mental  exhaustion  before 
the  day  was  half  over.  Force  of  habit  is  a  conservator 
of  strength  and  a  great  blessing,  even  though  it  too  often 
constrains  us  to  follow  the  beaten  paths  rather  than 
make  the  effort  necessary  to  reach  a  broader  and  a 
better  way. 

Nations  have  their  habits  as  well  as  individuals,  and 
time  and  custom  have  fixed  existing  law  with  reference 
to  finance  with  a  good  degree  of  firmness.  Nevertheless, 
taught  by  experience,  and  prodded  by  the  frequent  com- 
mercial disturbances  resulting  therefrom,  we  may  fairly 
hope  that  Congress  will  in  the  near  future  modify  the 
subtreasury  system  and  give  to  our  currency  a  degree  of 
elasticity. 


PART    FOUR 
BIBLIOGRAPHY 


BIBLIOGRAPHY 
CHAPTER  XX 

It  is  proposed  in  this  section  to  present  a  categorical  list  of 
books  and  other  publications  to  guide  the  reader  who  may  desire  to 
consult  original  records  and  study  the  discussions  of  the  several 
questions  at  greater  length. 

The  arrangement  of  the  list  will  enable  the  reader  to  determine, 
without  research  and  additional  examination,  which  of  the  volumes 
are  requisite  for  the  pursuit  of  the  specific  subject  upon  which  further 
information  is  desired. 

The  history  of  the  Colonial  and  Continental  periods  is  not 
voluminous,  and  the  official  records  are  not  only  scant  but  in  many 
particulars  fragmentary ;  nevertheless,  much  may  be  gleaned  from 
the  publications  named  below. 

On  the  subject  of  Coinage,  the  extracts  from  the  Journals  and 
manuscript  reports  of  the  Continental  Congress  appear  in  :  — 

International  Monetary   Conference,    1878,   Senate  Ex.  Doc, 
No.  58,  45th  Cong.,  3d  Sess.  (Washington,  1879). 
This  also  contains  Robert   Morris's  plan  for  a  coinage  system, 
Thomas  Jefferson's  Notes  on  the  same,  the  Reports  of  the  Board  of 
Treasury  and  the  Ordinance  on  Coinage  of  the  Continental  Con- 
gress, which  established  the  dollar  unit. 
Unofficial  publications  are  :  — 

History  of  American   Coinage,  David   K.  Watson,  New  York, 

1899. 
Money  and  Banking,    Horace  White,  Boston;   1896;   revised 

1902. 
The  Early  Coins  of  America,  Crosby. 
United  States  Mint  and  Coinage,  A.  M.  Smith,  Philadelphia, 

no  date. 
Financial  History  of  the  United  States,  Albert  S.  Bolles,  New 
York,  1896,  3  vols. 
Consult    also   the   numbers    of  Sound  Currency,  semimonthly 
(later  quarterly),  published  by  the  Reform  Club,  New  York,  1895- 
1903. 

437 


438  CONTEST  FOR  SOUND  MONEY 

Paper  Currency  legislation  prior  to  1789,  from  the  Journals  of 
Congress,  is  covered  by  the  books  mentioned  below,  and  the  data 
are  compiled  in  the  official  Treasury  publication  :  — 

History  of  the   Currency  of  the   Country,   etc.,  William   F. 

DeKnight,  Washington,  1897. 
The  Funding  System  of  the   United  States,  Jonathan  Elliot, 
House  Doc,  No.  15,  28th  Cong.,  1st  Sess. 
Unofficial  publications  are :  — 

Historical  Account  of  Massachusetts   Currency,   J.    B.    Felt, 

Boston,  1839. 
History  of  Bills  of  Credit  of  New  York,  John  H.  Hickox, 

Albany,  1866. 
Short  History  of  Paper  Money,  etc.,  William  M.  Gouge,  Phila- 
delphia, 1833. 
Historical  Sketches  of  the  Paper  Currency,  etc.,  Henry  Phil- 
lips, Jr.,  2  vols.,  Roxbury,  1865- 1866. 
Currency  and  Banking  in   Massachusetts,   A.   McF.    Davis, 

2  vols.,  New  York,  1900. 
History  of  American    Currency,   William   G.    Sumner,  New 

York,  1878;  revised  1884. 
The  Financier  and  the  Finances  of  the  American  Revolution, 

William  G.  Sumner,  2  vols.,  New  York,  1892. 
Brief  Account    of  Paper   Money  of  the    Revolution,  J.  W. 
Schuckers,  Philadelphia,  1874. 
Short  accounts  will  be  found  in  :  — 

United  States  Notes,   John   Jay  Knox,  New  York,   1888  (3d 

edition,  1894). 
Money  and  Banking,  Horace  White,  Boston,  1895  ;  revised  1902. 
Money,  Francis  A.  Walker,  New  York,  1891. 
Continental  Currency,  Byron  W.  Holt,  Sound  Currency,  Vol. 
V.,  No.  7,  1898. 
Statistics  of  the  issue  of  Continental  and  State  currency,  during 
the  Revolution,  and  of   its  fluctuation,  are  compiled  from  various 
sources  in  the  DeKnight  publication,  in  Phillips's  and  in  Schuckers's 
mentioned  above. 

Banking  during  the  earliest  period  is  discussed  in  :  — 

History  of  Banking  in  the  United  States,  William  G.  Sumner 
(being  Vol.  I.  of  the  New  York  Journal  of  Commerce  publi- 
cation, History  of  Banking  in  all  Nations,  in  4  vols.), 
New  York,  1896. 
History  of  Banking  in  the  United  States,  John  Jay  Knox, 
New  York,  1900. 


BIBLIOGRAPHY  439 

Also  the  volumes  of  W.  M.  Gouge  and  Horace  White  noted 
above,  and  the  Sound  Currency  publications. 

The  charter  of  the  Bank  of  North  America,  the  first  incorporated 
bank,  may  be  found  in  Clarke  and  Hall,  Legislative  and  Documen- 
tary History  of  Bank  of  the  United  States,  Washington,  1832. 

The  period  from  the  adoption  of  the  Constitution  (1789)  to  the 
opening  of  the  Civil  War  (1861)  is  in  many  respects  the  most 
important,  covering  as  it  does  the  formative  era  of  the  nation ;  and 
respecting  the  monetary  system,  the  experiments  which  the  people 
tried  and  repeated,  notwithstanding  the  many  sad  experiences,  serve 
as  instructive  guides  to  the  proper  understanding  of  the  subject. 

The  constitutional  provisions  will  be  better  understood  by  con- 
sulting :  — 

Elliot's  Debates  of  the  Constitutional  Convention. 

A  Plea  for  the  Constitution,  etc.,  George  Bancroft,  1884. 

The  laws  will  be  found  in  the  Statutes  at  Large,  but  the  princi- 
pal ones  have  been  reprinted,  especially  in  one  volume,  1886,  and  in 
Senate  Report  No.  831,  53d  Cong.,  3d  Sess. 

The  general  subject  of  money  is  covered  in :  — 

Finance  Reports,  being  the  reports  of  the  Secretaries  of  the 
Treasury,  including  some  special  reports  (many  of  the  latter  are, 
however,  to  be  found  elsewhere).  These  reports  are,  for  the 
period  1789  to  1849,  published  in  6  volumes;  thereafter  in  separate 
annual  volumes,  which  also  contain  the  reports  of  subordinate  offi- 
cers of  the  Treasury. 

Messages  and  Papers  of  the  Presidents,  Vols.  I.  to  V.,  cover- 
ing this  period.  In  the  earlier  messages  little  material  is  found; 
Madison,  Jackson,  and  later  presidents  devote  considerable  space  to 
the  subject. 

Congressional  action  is  recorded  officially  in  Annals  of  Congress 
(1789-1824),  Register  of  Debates  (1824-1837),  and  Congressional 
Globe  ( 1 838-1 860)  ;  but  for  the  period  from  1789  to  1856  the  material 
is  digested  in  Abridgment  of  Debates,  6  vols.,  Thomas  H.  Benton. 

Furthermore,  Public  Documents  of  Congress,  embracing  Execu- 
tive and  Miscellaneous  Papers,  Committee  Reports,  etc. 

Executive  action  is  also  recorded  in  American  State  Papers,  5 
vols. 

Unofficial  publications  on  the  general  subject  are:  — 
American  Statesmen,  Andrew  W.  Young,  1857. 
Statesman's  Manual,  Edw.  Williams,  3  vols.,  1858. 
Money  in  Politics,  J.  K.  Upton,  Boston,  1884. 
Money  and  Banking,  Horace  White,  Boston,  1902. 


440  CONTEST  FOR  SOUND  MONEY 

Niks' s  Register,  a  weekly  publication,  Baltimore,  1811-1848. 
Hunfs  Merchant's  Magazine,  a  monthly,  New  York,  1 840-1 860. 
Consideration   on  the   Currency  and  Banking  System  of  the 

United  States,  Albert  Gallatin,  Philadelphia,  1831. 
Suggestions  on  Banks  and  Currency,  Albert  Gallatin,  New  York, 
1 841. 
Coinage  is  especially  considered  in  Hamilton's  Report  on  the  Es- 
tablishment of  a  Mint,  found  in  Finance  Reports ;   Crawford's   in 
1820,  Ingham's  in  1830,  and  Gallatin's  paper  included  in  the  latter. 
These  and  other  important  documents  are  reprinted  in  International 
Monetary  Conference,  1878,  already  referred  to.     Secretary  Corwin's 
Treasury  Reports  also  contain  valuable  material.     A  concise  review 
of  the  coinage  history  also  appears  in  the  Report  of  the  Director  of 
the  Mint  for  1895. 

Congressional  action  is  recorded  in  the  Annals  and  Debates  and 
in  reports  by :  — 

Sanford,  Nathati,  Senate  Report  No.  3,  21st  Cong.,  2d  Sess., 

1830. 

White,  Campbell  P.,  House  Reports,  1831,  March  1832,  June 

1832,  1834;  all  of  these  are  reprinted  in  the  last- mentioned 

Report,  No.  278,  23d  Cong.,  1st  Sess.,  and  are  very  valuable. 

Hunter,  R.  M.  T.,  Senate   Report   No.  104,  32d  Cong.,  1st 

Sess. 
Benton's  Abridgment  of  Debates.   ' 
Statistics  of  the  composition  of  the  coins  and  the  volume  of  coin- 
age from  1792  to  date  are  annually  printed  in  the  Reports  of  Directors 
of  the  Mint. 

Unofficial  publications  are  :  — 

History  of  Bimetallis7n   in   the    U7iited  States,  J.    Laurence 

Laughlin,  4th  edition,  1897. 
Thirty  Years'  View,  Thomas  H.  Benton,  Boston,  2  vols.,  1854— 

1856. 
Watson's  History  of  Coinage,  and  White's  Money  and  Banking, 
already  referred  to. 
On  Currency  and  Banking  generally  the  official  data  for  the 
early  portion  of  the  period  are  exceedingly  meagre. 

Gallatin's  and  Crawford's  Treasury  Reports  and  the  latter's  cor- 
respondence with  State  Banks,  printed  in  American  State  Papers  ; 
Crawford's  special  report  of  1820  and  Elliot's  Funding  System,  con- 
tain almost  all  the  information  prior  to  1833,  when  Congress  directed 
the  Treasury  to  collect  data  in  State  Banks  and  their  Currency. 
Knox  in  Report  Comptroller  of  Currency,  1876,  compiled  the  data 


BIBLIOGRAPHY  44 1 

from  the  earliest  days  to  1863,  in  fairly  satisfactory  form  (statistics 
in  the  appendix) .  This  was  in  large  part  reprinted  in  Senate  Ex. 
Doc,  No.  38,  53d  Cong.,  2d  Sess. 

Hepburn  in  the  same  Bureau's  Report  for  1892  materially  enlarged 
the  scope  of  the  information,  adding  much  valuable  statistical  mate- 
rial in  the  appendix. 

After  1833  the  Finance  Reports  contain  much  important  material 
and  the  separate  annual  Treasury  Report  on  Condition  of  Banks  gives 
all  the  data  obtainable  at  this  time.  Special  mention  should  be  made 
of  the  historical  compendium  on  banking  embraced  in  the  appendix 
to  Guthrie's  Treasury  Reports,  1 855-1 856,  and  of  the  reports  of  the 
condition  of  depositary  banks,  in  appendices  to  the  Finance  Reports, 
1835  and  thereafter. 

Discussions  of  the  operations  of  State  Banks  of  later  date  will  be 
found  in  the  Messages  of  Presidents,  Jackson,  Van  Buren,  Tyler,  and 
Buchanan,  and  in  the  Finance  Reports  of  their  Secretaries  of  the 
Treasury. 

The  volume  of  money  is  discussed  by  Elliot,  Gallatin,  and  Guthrie. 

Unofficial  publications  of  the  early  period  include  Gallatin's  Con- 
sideration of  Currency  and  Banking  System,  wherein  a  very  detailed 
account  of  banks  is  given  ;  Gouge's  Short  History,  which  is  equally 
interesting. 

The  works  above  referred  to  of  Sumner,  Knox,  Bolles,  and  White 
are  valuable,  the  two  former  being  quite  comprehensive.  See  also 
Treatise  on   Currency  and  Banking,  Condy  Raguet,  Philadelphia, 

1839- 

In  Sound  Currency,  monographs  treating  of  the  banks  and  note- 
issues  of  the  several  states  are  most  instructive.     See  particularly 
the  papers  by  Horace  White,  and  L.  Carroll  Root. 
Special  features  are  discussed  in  :  — 

The  Suffolk  Bank,  D.  R.  Whitney,  Cambridge,  Mass.,  1878. 
The  Banks  of  New  York  and  Panic  of  /Sjj,  J.  S.  Gibbons, 

New  York,  1859. 
History  of  the  Surplus  Revenue  of  1837,  E.  G.  Bourne,  New 

York,  1885. 
History  of  the  Bank  of  New  York,  H.  W.  Domett,  1886. 
Treasury  Notes,  aside  from  the  several  Finance  Reports  prior 
to  1861  are  officially  and  comprehensively  treated  in  DeKnight's  vol- 
ume already  mentioned,  and  in  History  of  National  Ijians  of  the 
United  States,  R.  A.  Bayley,  Washington,  1881.  (Also  embraced 
in  Vol.  VII.  of  the  10th  Census.) 

It  is  also  of  interest  to  examine  what  Madison,  Van  Buren,  and 


442  CONTEST  FOR  SOUND  MONEY 

Tyler  in  their  messages,  and  Crawford  in  his  special  report  of  1820,' 
say  of  the  use  of  these  notes  as  currency. 

Unofficial  publications  include  Knox's  United  States  Notes ;  Sum- 
ner's several  works,  and  Bolles's  History. 

Bank  of  the  United  States.  The  most  comprehensive  pub- 
lication of  official  data  from  1790  to  1832  is :  — 

Clarke  and  Hall,  Legislative  and  Documentary  History,  embrac- 
ing Hamilton's  original  plan ;  the  debates  in  Congress, 
opinions  of  Hamilton  and  Jefferson  on  the  question  of  con- 
stitutionality, the  proposed  and  adopted  charters  ;  the  Bank 
War ;  Gallatin,  Dallas,  Madison,  Crawford,  Webster,  Clay, 
Calhoun,  and  others  on  the  question  generally  ;  Congressional 
investigations  ;  McDuffie's  Reports  ;  and  the  Supreme  Court 
Decision  by  Marshall,  on  the  Constitutionality  (McCulloch 
vs.  Maryland). 
Finance  Reports,  contain  papers  by  Hamilton,  Gallatin,  Dallas, 
Rush,  McLane,  Taney,  Woodbury,  and  others  on  the  Bank. 
Messages  of  Presidents,  Madison,  Jackson,  Van  Buren,  Tyler, 

and  Polk. 
Benton's  Abridgment  of  Debates  and  his  Thirty  Years'1  View 
also  cover  a  great  many  points. 
A  concise  review  may  also  be  found  in  Report  Comptroller  of  Cur- 
rency, 1876  (Knox),  with  statistics  in  the  appendix. 

Unofficial  publications  embracing  valuable  material  are  the  already 
named  Sumner's  History  of  Banking,  Knox's  work  of  the  same  name, 
White's  Money  and  Banking,  Bolles's  Financial  History,  Schouler's 
History,  and  Gallatin's  Consideration  for  a  Currency  System,  Will- 
iams's Statesman"1  s  Manual,  Niles^s  Register.  Sound  Currency,  Vol. 
IV.,  Nos.  7,  17,  18.  History  of  the  United  Slates  of  America,  Henry 
Adams,  N.Y.,  1889-1891,  9  vols.  Constitutional  and  Political  His- 
tory of  the  United  States,  H.  E.  Von  Holst,Chicago,  1877-1892, 7  vols. 
G.  T.  Curtis's  Constitutional  History  of  the  United  States,  2  vols. 

Special  features  are  treated  in  the  works  and  writings  of  Hamilton, 
Jefferson,  Madison,  Gallatin,  Dallas,  Clay,  Calhoun,  Webster,  and 
Woodbury,  and  in  the  Essays  of  Matthew  Carey. 

In  Biographical  Works,  see  Adams  and  Stevens  on  Gallatin ; 
Schurz  on  Clay ;  Parton  and  Sumner  on  Jackson ;  Lodge,  Morse, 
and  Sumner  on  Hamilton;  Shepard  on  Van  Buren. 

See  also  Removal  of  Deposits  from  Bank  of  United  States, 

W.  J.  Duane,  New  York,   1838;    and  on  the  same   topic, 

Secretary  Taney's  separate  Report  in  Finance  Report,  1833. 

General  History  of  Banks,  etc.,  T.  H.  Goddard,  New  York, 


BIBLIOGRAPHY  443 

1 83 1,  contains  Cheves's  report  on  the  reorganization  of  the 
Bank. 

The  Subtreasury  System  is  officially  discussed  by  Van  Buren, 
Tyler,  and  Polk  in  their  messages,  and  by  Secretaries  Woodbury, 
Ewing,  Walker,  Guthrie,  and  Cobb,  in  the  Finance  Reports.  Em- 
braced in  some  of  the  later  volumes  will  be  found  Wm.  M.  Gouge's 
reports  of  examinations  of  the  Subtreasuries  ;  see  especially  that  of 
1854. 

The  Abridgment  of  Debates  covers  the  Congressional  discussion. 

Unofficial  books  on  the  subject  are  Life  and  Times  of  Silas 
Wright,  R.  H.  Gillette,  Albany,  1874. 

Also  Benton's  Thirty  Years'1  View,  important  references  are  also 
found  in  Webster's,  Clay's,  Woodbury's,  and  Calhoun's  writings,  and 
in  the  biographical  monographs  on  Clay  and  Van  Buren  already 
referred  to. 

The  Independent  Treasury,  etc.,  David  Kinley,  New  York,  1893,  is 
quite  a  complete  treatise. 

The  period  after  the  Civil  War  is  covered  by  a  multitude  of  books, 
pamphlets,  reports,  etc. ;  mention  is  made  here  only  of  the  principal 
ones,  giving  the  reader  an  opportunity  to  consult  those  most  effec- 
tively presenting  the  facts  and  discussions. 

The  official  publications  covering  the  entire  field  are :  — 

The  Congressional  Globe  to  1873,  and  Congressional  Record,  1874 
to  date,  containing  the  debates  in  full ;  Congressional  Documents,  of 
which  each  house  publishes  a  separate  collection,  including  Executive 
and  Miscellaneous  Documents  and  Committee  Reports,  presenting  the 
subjects  prior  to  legislative  action-.  A  number  of  these  documents 
are  also  published  separately  by  the  Executive  Departments. 

Messages  and  Papers  of  Presidents,  Vols.  VI.  to  X. ;  every  incum- 
bent of  the  presidency  during  the  period  has  had  occasion  to  discuss 
the  money  question. 

Finance  Reports,  annually  for  fiscal  years  ending  June  30,  em- 
bracing the  reports  of  Secretaries  of  the  Treasury  and  subordinate 
officers,  of  which  latter  the  most  important  are  the  Reports  of  the 
Comptrollers  of  the  Currency,  Directors  of  the  Mint  and  Treasurers 
of  the  United  Slates,  which  since  about  1870  have  also  been  pub- 
lished separately  with  exhaustive  statistical  appendices.  The  Mint 
Bureau  also  publishes,  since  1880,  annual  Reports  on  Production  of 
Gold  and  Silver,  by  calendar  years.  The  Bureau  of  Statistics  pub- 
lishes monthly  (formerly  also  quarterly)  and  annually  Reports  on 
Commerce  and  Navigation  ;  the  monthlies  in  the  later  years  include 
besides  the  statistics  of  imports  and  exports,  valuable  statistical  data 


444  CONTEST  FOR  SOUND  MONEY 

on  monetary  subjects,  and  those  statistics  are,  in  digested  form,  repro- 
duced in  the  Statistical  Abstracts  of  the  United  States,  annually,  be- 
ginning in  1 8? i. 

A  Treasury  Circular,  No.  113,  in  pamphlet  form,  containing  a 
digest  of  the  laws  and  statistics  of  coinage  and  currency,  Washing- 
ton, 1900.     (Previously  issued  in  1896.) 

Unofficial  books  covering  all  the  subjects  generally  are :  — 

Money  and  Banking,  Horace  White,  Boston,  1895  ;  revised  1902. 
Political  History  of  the  Rebellion,  E.  McPherson,  Washington, 

1864. 
Political  History  of  the  Reconstruction,  same  author,  Washing- 
ton, 1 87 1. 
Handbook  of  Politics,  biennially,  1870- 1892,  same  author. 
McPherson's  works  give  the  various  measures  and  amendments, 
the  votes  on  the  several  propositions,  etc.,  constituting  a  valuable 
digest  of  the  actions  of  Congress. 

Speeches  and  Reports  in  Congress,  John  Sherman,  New  York, 

1881. 
Recollections  of  Twenty  Years,  same  author,  Chicago,  1895. 
Twenty  Years  in  Congress,  James  G.  Blaine,  Norwich,  Conn., 

1884. 
Financial  History  of  the  United  States,  Albert  S.  Bolles. 
Thirty  Years  of  American  Finance,  A.  D.  Noyes,  New  York, 

1898. 
Money  in  Politics,  J.  K.  Upton,  Boston,  1884. 
Money  and  Legal  Tender,  H.  R.  Linderman  (sometime  Direc- 
tor of  the  Mint),  New  York,  1877. 
Reports  of  Monetary  Commission  of  Indianapolis  Convention, 
J.  Laurence  Laughlin,  Chicago,  1898.     (Covers  the  entire  field 
of  our  monetary  history  and  recommends  concrete  reforms.) 
The  Natural  Law  of  Money,  William  Brough,  New  York,  1894. 
Open  Mints  and  Free  Banking,  same  author,  New  York,  1898. 
Sound  Currency,  published  semimonthly  (afterwards  quarterly) 

by  the  Reform  Club,  New  York,  1895-1903. 
Men  and  Measures  of  Half  a  Century,  Hugh  McCulloch,  New 

York,  1889. 
Monetary  Systems  of  the  World,  M.  L.  Muhleman,  New  York, 

1896;  a  digest  of  laws  and  statistics. 
Money  and  its  Laws,  Henry  V.  Poor,  New  York,  1877. 
Our  National  Currency  and  the  Money  Problem,  Amasa  Walker, 

Boston,  1876. 
Principles  of  Money,  J.  Laurence  Laughlin,  Chicago,  1903. 


BIBLIOGRAPHY  445 

Financial  History  of  United  States,  Davis  R.  Dewey,  New 
York,  1903. 
Coinage  received  but  little  attention  during  the   first   decade 
(1861-1870).     The  mint  reports  are  almost  the  sole  repositories  of 
information. 

International  Monetary  Conference,  1867,  Report  of  Proceedings, 
by  Samuel  B.  Ruggles,  Senate  Ex.  Doc,  No.  14,  40th  Cong.,  2d 
Sess.,  1868,  also  reprinted  in  International  Monetary  Conference, 
1878  (see  below). 

This  conference  was  called  for  the  purpose  of  considering  the 
adoption  of  an  international  gold  coin.  The  subject  was  further 
considered  in  Senate  Reports  of  the  Congress  named,  and  discussed 
by  Sherman  in  his  Speeches  and  Reports. 

Early  in  the  second  decade  of  the  period,  the  silver  question 
developed.  From  the  mass  of  publications  which  it  called  forth, 
the  following  are  especially  recommended  :  — 

History  of  the  Coinage  Act  of  1873,  Senate  Misc.  Doc,  No. 
132,  41st  Cong.,  2d  Sess.     In  this  publication  the  progressive 
steps  which  omitted  the  silver  dollar  from  the  coinage  system, 
improperly  denounced  as  the  "Crime  of  1873,"  are  fully  set 
forth,  refuting  the  charge.     Reprinted  in  1900. 
United  States    Monetary    Commission   of   1876,   Report    and 
Testimony,  2  vols.,  Senate  Report  No.  703,  44th  Cong.,  2d 
Sess. 
International  Monetary  Conference,  1878,  Report  of  Proceed- 
ings, with  appendix  containing  a  mass  of  valuable  material 
not  found  elsewhere,  compiled  by  S.  Dana  Horton,  Senate 
Ex.  Doc,  No.  58,  45th  Cong.,  3d  Sess.,  1879. 
International  Monetary  Conference,  1881,  House  Misc.  Doc, 

No.  396,  49th  Cong.,  1st  Sess. 
Bimetallism  in  Europe,  E.  Atkinson,  Ex.  Doc,  No.  34,  50th 
Cong.,  1st  Sess.,  1887,  also  printed  in  Consular  Report  No. 
87.  Contains  translation  of  A.  Soetbeer's  remarkable  statis- 
tical compilation  of  materials  for  the  study  of  the  coinage 
question. 
British  Gold  and  Silver  Commission,  Report  of,  reprinted  as 

Senate  Misc.  Doc,  No.  34,  50th  Cong.,  2d  Sess.,  1889. 
International  Monetary  Conference,  1892,  Senate  Ex.  Doc,  No. 
82,  52d  Cong.,  2d  Sess. 
Many  reports  from  the  Coinage  Committee  of  the  House  and  the 
Finance  Committee  of  the  Senate  appear  in  the  Congressional  Docu- 
ments ;  among  the  notable  ones  are  Wickham  &  Bartine,  House 


446  CONTEST  FOR  SOUND  MONEY 

Report  No.  3967,  51st  Cong.,  2d  Sess. ;  Bland's  House  Report  No. 
249,  5 2d  Cong.,  1st  Sess. 

Most  of  the  Presidents,  beginning  with  Hayes  (whose  veto  mes- 
sage, in  February  in  1878,  is  of  special  importance),  referred  to 
the  silver  question  in  their  messages.  Cleveland's  special  mes- 
sage in  August,  1893,  preceding  the  suspension  of  silver  purchases, 
is  of  extraordinary  interest.  The  Secretaries  of  the  Treasury  also 
touch  on  the  subject  almost  continuously  from  1878  ;  the  fullest  con- 
sideration will  be  found  in  Manning's  report  for  1885  and  Windom's 
for  1889.  Technical  and  statistical  information,  as  complete  as 
could  be  desired,  will  be  found  in  the  reports  of  the  Mint  Bureau, 
that  of  1895  containing  a  review  of  the  coinage  question  from 
1776. 

Unofficial  publications  include  :  — 

History  of  Bimetallism   in    the    United  States,   J.   Laurence 
Laughlin,    New   York,    1892.      (Unqualifiedly   opposed    to 
bimetallism.) 
History  of  American  Coinage,  David  K.  Watson,  New  York, 

1899. 
Nomisma  or  Legal  Tender,  Henri  Cernuschi,  New  York,  1877. 
(A  leading  exponent  of  international  bimetallism,  who  pub- 
lished many  pamphlets  here  and  abroad.) 
The  India  Commission  Report  (British),  reprinted  as  Senate 

Misc.  Doc.  No.  23,  53d  Cong.,  1st  Sess. 
The  Berlin  Silver  Conference  (Germany),  reprinted  as  Senate 

Misc.  Doc.  No.  274,  53d  Cong.,  2d  Sess. 
International  Bimetallism,  F.  A.  Walker,  New  York,  1896. 
The  Silver  Situation,  Frank  W.  Taussig,  New  York,  1876. 
Silver  in  Europe,  S.  Dana  Horton,  New  York,  1890. 
Silver  arid  Gold,  S.  Dana  Horton,  Cincinnati,  1877. 
Consult  also  the  numerous  pamphlets  on  Silver  in  Sound  Cur- 
rency. 

Economic   Tracts,  Soc.  for  Pol.  Education,  New  York,   1884, 

includes  numbers  by  McCulloch  and  others. 
International  Monetary  Conferences,  H.  B.  Russell,  New  York, 
1898.      (A  review  of  all  the  conferences  and  connected  his- 
tory.) 
If  not  Silver,  What?  J.  W.  Bookwalter,  Springfield,  O.,  1896. 
An  Honest  Dollar,  E.  B.  Andrews,  New  York,  1889. 
Treasury  Notes  and  Legal  Tender  Notes  form  the  subject 
of  discussion  in  the  Messages  of  Presidents  and  Finance  Reports 
throughout  the  period,  and  much  space  is  devoted  thereto  in  the 


BIBLIOGRAPHY  447 

congressional    debates.     Specially  important   are   the  reports  of 
Chase,  McCulloch,  Sherman,  Manning,  and  Carlisle. 

Specie  Resumption  and  Refunding  of  the  Debt,  Report  by  Secre- 
tary Sherman,  Ex.  Doc,  No.  9, 46th  Cong.,  2d  Sess.,  1880 ;  National 
Loans  of  the  United  States,  R.  A.  Bayley,  Washington,  1880; 
History  of  the  Currency  of  the  Country,  W.  F.  DeKnight,  Washing- 
ton, 1897.  The  two  last  mentioned  give  the  forms  of  notes,  com- 
plete statistics,  and  brief  statements  of  the  legislative  provisions. 

On  the  specific  questions  of  legal  tender,  the  Supreme^  Court 
Reports,  8th  and  12th  Wallace,  and  110th  U.S. 

The  unofficial  publications  besides  those  already  mentioned  are  :  — 
United  States  Notes,  John  Jay  Knox,  New  York,  1884. 
Life  of  Chase,  J.  W.  Schuckers,  New  York,  1874. 
History  of  Legal  Tender  Paper  Money,  etc.,  E.  G.  Spaulding, 
Buffalo,  1869.     (The  author  of  the  Greenback  Law;  gives 
abstracts  of  debates  and  a  succinct  historical  account.) 
A  History  of  the  Greenbacks,  W.  C.  Mitchell,  Chicago,  1903. 
Legal  Tender,  S.  P.  Breckinridge,  Chicago,  1903. 

The  legal  tender  decisions  in  full  also  appear  in  McPherson's 
Handbooks,  and  a  historical  discussion  in  Bancroft's  Plea  for  the 
Constitution,  New  York,  1884. 

Special  papers  on  the  legal  tenders  and  their  cost,  the  premium  on 
gold  and  prices  as  affected  thereby,  appear  in  Sound  Currency. 

The  daily  premium  on  gold  during  suspension  of  specie  payments 
may  be  found  in  Homans's  Merchants'*  and  Bankers'1  Almanac  (an- 
nual) ;  also  in  a  small  volume  published  by  the  New  York  Gold  Ex- 
change (Mersereau).  For  the  Gold  Panic,  1869,  see  House  Report 
No.  31,  41st  Cong.,  2d  Sess. 

Banking  and  Bank-notes.  Chase's  Finance  Reports,  in  which 
the  system  is  outlined,  and  the  series  of  Reports  of  Comptrollers  of 
the  Currency,  1864-1902,  give  an  adequate  survey  of  the  birth  and 
history  of  the  national  banking  system,  with  statistics  more  com- 
plete than  ever  attempted  by  any  country.  The  original  act  of  1863 
was  published  as  "  The  National  Currency  Act,  1863  " ;  the  revised 
act  with  amendments  from  time  to  time  appears  separately  {National 
Bank  Act)  and  most  complete  in  the  one  of  1900. 

Certain  of  the  Reports  of  Comptrollers  contain  special  features ; 
Knox  in  1875  and  1876  reviews  other  banking  systems,  particularly 
state  banks  in  the  latter;  Hepburn  in  1892  devotes  much  space  to  state 
banks.  Knox  prepared  a  special  report  of  the  use  of  credit  instru- 
ments, 1881  ;  and  Lacey  in  1891,  as  well  as  Eckels,  1896,  repeated  this 
work.     The  latter  also  presented  in  1896  a  special  report  on  deposits 


448  CONTEST  FOR  SOUND  MONEY 

and  depositors  in  banks.     A  useful  digest  of  legal  decisions  affecting 
the  banks  will  be  found  in  each  of  the  reports  since  1876. 

Congressional  documents  contain  much  valuable  information,  par- 
ticularly the  reports  of  hearings  in  the  period  from  1893  to  1901, 
when  bank-note  reform  became  a  burning  question,  and  the  many 
plans  suggested  are  printed  in  full  in  these  volumes.  See  on  this 
subject  House  Reports,  No.  1508,  53d  Cong.,  3d  Sess.,  and  No.  1575, 
55th  Cong.,  2d  Sess. 

Statistics  of  state  banks  appear  in  the  Reports  of  the  Comptrollers 
of  the  Currency  since  1874,  and  in  reports  in  the  go's  appear  digests 
of  the  laws  of  the  states  relating  to  banks. 
The  most  valuable  unofficial  works  are  :  — 

History  of  Banking  in   tfte   United  States,  W.  G.   Sumner, 

New  York,  1896. 
History  of  Banking  in  the  United  States,  John  Jay  Knox, 

New  York,  1900. 
History  of  Modern  Banks  of  Issue,  Charles  A.  Conant,  New 

York,  1896. 
Theory   and   History   of  Banking,   Chas.   F.    Dunbar,   New 
York,  1894. 
Asset  Banking,  branch  banking,  the  Baltimore  plan,  and  other 
features  are  specially  discussed  in  a  number  of  the  pamphlets  in 
Sound  Currency,  in  the  two  last-named  works  and  in  Report  Indian- 
apolis Monetary  Commission. 

The  reports  of  the  proceedings  of  the  annual  meetings  of  the 
American  Bankers'1  Association,  1875-1902,  also  contain  much  valu- 
able material  on  the  subject  of  banking  and  currency. 
The  Clearing-house  System  is  discussed  in  :  — 
The  New  York  Clearing  House,  N.  Squire,  1888. 
Clearing  Houses,  James  G.  Cannon,  New  York,  1900. 
Federal  Clearing  Houses,  Theodore  Gilman. 
Auxiliary   Currency  is  well  treated  in  Sound  Currency  by 
J.  D.  Warner,  Vol.  II.,  No.  6. 

Consult  also  as  to  the  Subtreasury :  — 

The  Independent  Treasury  of  the  United  States,  David  Kin- 
ley,  New  York,  1893,  and  White,  Money  and  Banking;  Sum- 
ner, History  of  Banking  in  the  United  States. 
And  on  other  pertinent  topics  :  — 

The  Canadian  Banking  System,  R.  M.  Breckinridge,  Toronto, 
1894,  reprinted  in  American  Economic  Association  publica- 
tions. 
The  Currency  and  Banking  Law  of  Canada,  W.  C.  Corn  well, 
New  York,  1895. 


BIBLIOGRAPHY  449 

Price,  Wages,  etc.,  in  U.  S.  Senate  (Aldrich)  Reports,  No.  986, 
52c!  Cong.,  1st  Sess.     No.  1394,  520!  Cong.,  2d  Sess. 

The  Volume  of  Money  is  given  in  the  Statistical  Abstracts  in  the 
Treasury  Circular,  No.  1/3  (1900),  and  in  the  Finance  Reports  in 
recent  years.  In  Reports  of  the  Treasurer  of  the  United  States  will 
be  found  monthly  statistics  since  1878  in  detail.  Details  are  dis- 
cussed also  in  Muhleman's  Monetary  Systems. 

The  Panic  of  1893  and  the  subsequent  years  of  monetary 
troubles,  and  the  bond  issues,  are  discussed  in  the  Messages  of  the 
Presidents  and  in  Finance  Reports  for  the  years,  by  White,  Noyes, 
Muhleman,  and  in  numbers  of  Sound  Currency. 


APPENDIX 


ACT  OF  HIS  MAJESTY'S   PROVINCE   OF  THE  MAS- 
SACHUSETTS-BAY, IN   NEW-ENGLAND 

Anno  regni  Regis  Georgii  II  Vicesimo-tertio 

CHAPTER   V 

An  Act  for  ascertaining  the  Rates  at  which  coined  Silver  and 
Gold  and  English  Half-pence  and  Farthings  may  pass 
within  this  Government. 

Whereas  in  and  by  an  Act  made  and  passed  in  the  twenty- 
second  Year  of  his  present  Majesty's  Reign,  Intituled,  An  Act 
for  drawing  in  the  Bills  of  Credit  of  the  several  Denominations 
which  have  at  any  Time  been  issued  by  this  Government  and 
are  still  outstanding,  and  for  ascertaining  the  Rate  of  coin'd 
Silver  in  this  Province  for  the  future  ;  it  is  enacted  in  the  Words 
following,  viz.  "  That  all  Bargains,  and  Contracts,  Debts  and 
Dues  whatsoever  which  shall  be  agreed,  contracted  or  made 
after  the  thirty-first  Day  of  March  1750,  shall  be  understood, 
and  are  hereby  declared  to  be  in  Silver  at  six  Shillings  and 
eight  Pence  per  Ounce,  and  all  Spanish  mill'd  Pieces  of  Eight 
of  full  Weight  shall  be  accounted,  taken  and  paid  at  the  Rate 
of  six  Shillings  per  Piece  for  the  discharge  of  any  Contracts  or 
Bargains  to  be  made  after  the  said  thirty-first  Day  of  March 
1750,  the  Halves,  Quarters  and  other  less  Pieces  of  the  same 
Coin  to  be  accounted,  received,  taken  or  paid  in  the  same 
Proportion." 

And  whereas  there  is  great  Reason  to  apprehend  that  many 
and  great  Inconveniences  may  arise  in  Case  any  coin'd  Silver 
or  Gold,  or  English  Half  Pence  and  Farthings  should  pass  at 
any  higher  Rate  than  in  a  just  Proportion  to  Spanish  Pieces  of 
Eight  or  coin'd  Silver  at  the  Rates  aforesaid: 

Be  it  therefore  enacted  by  the  Lieutenant  Governor,  Council 
and  House  of  Representatives,  That  it  shall  not  be  lawful  for 
any  Person  within  this  Government  from  and  after  the  thirty- 
first  Day  of  March  One  thousand  seven  Hundred  and  fifty,  to 

45  » 


452  CONTEST  FOR  SOUND  MONEY 

receive,  take  or  pay  any  of  the  following  Coin  at  any  greater 
or  higher  Rate  than  is  allowed  by  this  Act,  viz.  A  Guinea  at 
twenty-eight  Shillings ;  An  English  Crown  at  six  Shillings  and 
eight  Pence :  An  half  Crown  at  three  Shillings  and  four  Pence  : 
An  English  Shilling  at  one  Shilling  and  four  Pence :  An  Eng- 
lish six  Pence  at  eight  Pence :  A  double  Johannes  or  Gold  Coin 
of  Portugal  of  the  Value  of  three  Pounds  twelve  Shillings  Ster- 
ling, at  four  Pounds  sixteen  Shillings  :  A  single  Johannes  of  the 
Value  of  thirty-six  Shillings  Sterling  at  forty-eight  Shillings :  A 
Moidore  at  thirty-six  Shillings :  A  Pistole  of  full  Weight  at 
twenty-two  Shillings :  Three  English  Farthings  for  one  Penny  ; 
and  English  Half  Pence  in  greater  or  less  Numbers  in  Pro- 
portion. 

And  be  it  further  enacted,  That  if  any  Person  within  this 
Government  shall  after  the  thirty-first  Day  of  March  One 
thousand  seven  Hundred  and  fifty,  for  the  discharge  of  any 
Contract  or  Bargain,  account,  receive,  take  or  pay  any  of  the 
several  Species  of  Coins  before  mentioned  at  any  greater  or 
higher  Rate  than  at  which  the  same  is  hereby  regulated, 
settled  and  allowed  to  be  accounted,  received,  taken  or  paid, 
every  Person  so  accounting,  receiving,  taking  or  paying  the 
same  contrary  to  the  Directions  herein  contained,  shall  forfeit 
the  sum  of  fifty  Pounds  for  every  such  Offence,  one  Moiety 
thereof  to  his  Majesty  for  the  Use  of  this  Government,  the 
other  Moiety  to  such  Person  or  Persons  as  shall  sue  for  the 
same ;  to  be  recovered  with  full  Costs  of  Suit  by  Action  of 
Debt,  Bill,  Plaint  or  Information  in  any  of  his  Majesty's  Courts 
within  this  Province. 

Provided  always,  and  it  is  hereby  declared,  That  nothing  in 
this  Act  shall  be  understood  to  restrain  any  Person  or  Persons 
from  accounting,  receiving,  taking  or  paying  any  of  the  above 
mentioned  Species  or  Coins  in  discharge  of  any  Debts,  Con- 
tracts or  Bargains  made  before  the  thirty-first  Day  of  March 
One  Thousand  seven  Hundred  and  fifty,  at  the  following  Rates, 
viz.  For  any  Debt  contracted  before  the  said  thirty-first  Day 
of  March,  and  understood  to  be  payable  in  Bills  of  the  old 
Tenor  in  such  Proportion  higher  or  greater  than  the  Rates  set 
at  in  this  Act,  as  forty-five  Shillings  is  to  six  Shillings  ;  and  for 
any  Debt  contracted  before  the  said  thirty-first  Day  of  March, 
and  understood  to  be  payable  in  Bills  of  the  middle  Tenor  or 
Bills  of  the  new  Tenor,  in  such  Proportion  higher  or  greater 
than  the  Rates  set  at  in  this  Act,  as  eleven  Shillings  and  three 
Pence  is  to  six  Shillings :  Any  Thing  in  this  Act  to  the  con- 
trary notwithstanding. 


APPENDIX  453 

II 

DIGEST  OF  LAWS  OF  THE  UNITED  STATES  RELAT- 
ING TO  COINAGE,  CURRENCY,  AND  BANKING 

THE  CONTINENTAL  CONGRESS,   1775  TO   1789 

Resolutions  of  June  22,  1775 

Resolved,  That  a  sum  not  exceeding  two  millions  of  Spanish 
milled  dollars  be  emitted  by  the  Congress  in  bills  of  credit,  for 
the  defence  of  America. 

Resolved,  That  the  twelve  confederated  colonies  be  pledged 
for  the  redemption  of  the  bills  of  credit,  now  directed  to  be 
emitted. 

Resolutions  of  June  23,  1775 

Resolved,  That  the  form  of  the  bills  be  as  follows : 

CONTINENTAL   CURRENCY 
No. Dollars. 

This  bill  entitles  the  bearer  to  receive Spanish  milled 

dollars,  or  the  value  thereof  in  Gold  or  Silver,  according  to  the 
resolutions  of  the  Congress,  held  at  Philadelphia,  on  the  10th 
day  of  May,  a.d.  1775. 

Resolved,  That  Mr.  J.  Adams,  Mr.  J.  Rutledge,  Mr.  Duane, 
doctor  Franklin,  and  Mr.  Wilson,  be  a  committee  to  get  proper 
plates  engraved,  to  provide  paper,  and  to  agree  with  printers 
to  print  the  above  bills. 

Resolution  of  April  19,  1776 

Resolved,  That  a  committee  of  seven  be  appointed  to  ex- 
amine and  ascertain  the  value  of  the  several  species  of  Gold 
and  Silver  Coins,  current  in  these  colonies,  and  the  proportions 
they  ought  to  bear  to  Spanish  milled  dollars. 


ARTICLES   OF   CONFEDERATION   OF  JULY  9,  1778 

Article  9.  ...  The  united  states  in  congress  assembled 
shall  also  have  the  sole  and  exclusive  right  and  power  of 
regulating  the  alloy  and  value  of  coin  struck  by  their  own 
authority,  or  by  that  of  the  respective  states  —  fixing  the  stand- 
ard of  weights  and  measures  throughout  the  United  States.  .  .  . 


454  CONTEST  FOR  SOUND  MONEY 

The  united  states  in  congress  assembled  shall  have  authority 
...  to  borrow  money  or  emit  bills  on  the  credit  of  the  united 
states.  .  .  . 

Resolutions  of  July  6,  1785 

Resolved,  That  the  money  unit  of  the  United  States  of 
America  be  one  dollar. 

Resolved,  That  the  smallest  coin  be  of  copper,  of  which  200 
shall  pass  for  one  dollar. 

Resolved,  That  the  several  pieces  shall  increase  in  a  decimal 
ratio. 

Resolution  of  August  8,  1786 

Resolved,  That  the  Standard  of  the  United  States  of 
America  for  Gold  and  Silver,  shall  be  Eleven  parts  fine,  and 
one  part  alloy. 

That  the  Money  Unit  of  the  United  States,  being  by  the 
resolve  of  Congress  of  the  6th  July,  1785,  a  dollar,  shall  contain 
of  fine  silver,  375T6^\  grains. 

That  the  money  of  account,  to  correspond  with  the  division 
of  coins  agreeably  to  the  above  resolve,  proceed  in  a  decimal 
ratio  agreeably  to  the  forms  and  manner  following,  viz. : 
Mills  :    the  lowest  money  of  accompt,  of  which  one 
thousand  shall  be  equal  to  the  federal  dollar,  or 
money  unit,         .......      0.001 

Cents  :   the  highest  copper  piece,  of  which  one  hun- 
dred shall  be  equal  to  the  dollar,  .         .         .      0.0 10 
Dismes  :  the  lowest  silver  coin,  ten  of  which  shall  be 

equal  to  the  dollar,      .         .         .         .         .         .0.100 

Dollar:  the  highest  silver  coin,  .....      1.000 

That  betwixt  the  dollar  and  the  lowest  copper  coin,  as  fixed 
by  the  resolve  of  Congress  of  the  6th  July,  1785,  there  shall  be 
three  silver  coins  and  one  copper  coin.  That  the  silver  coins 
shall  be  as  follows  : 

One  coin  containing  187-j^  grains  of  fine  silver,  to  be  called 
a  half  dollar : 

One  Coin  containing  JStwujj  grains  °f  fine  silver,  to  be  called 
a  double  disme  : 

And  one  coin  containing  37xt6A  grams  °f  nne  silver,  to  be 
called  a  disme. 

That  the  two  copper  coins  shall  be  as  follows  :  — 

One  equal  to  the  100th  part  of  the  federal  dollar,  to  be 
called  a  cent. 

One  equal  to  the  200th  part  of  the  federal  dollar,  to  be 
called  a  half  cent : 


APPENDIX  455 

That  two  pounds  and  a  quarter  avoirdupois  weight  of  copper, 
shall  constitute  one  hundred  cents. 

That  there  shall  be  two  gold  coins  :  One  containing  246T2¥6^5- 
grains  of  fine  gold,  equal  to  10  dollars,  and  to  be  stamped  with 
the  impression  of  the  American  eagle,  and  to  be  called  an  eagle  : 

One  containing  123^^  grains  of  fine  gold,  equal  to  5 
dollars,  to  be  stamped  in  like  manner,  and  to  be  called  a  half 
eagle. 

That  the  mint  price  of  a  pound  troy  weight  of  uncoined 
silver,  n  parts  fine  and  one  part  alloy,  shall  be  9  dollars, 
9  dismes  and  2  cents.1 

That  the  mint  price  of  a  pound  troy  weight  of  uncoined  gold, 
1 1  parts  fine  and  one  part  alloy,  shall  be  209  dollars,  7  dismes, 
and  7  cents. 

Mint  ordinance  of  October  16,  1786  —  An  Ordinance  for  the 
establishment  of  the  Mint  of  the  United  States  of  America, 
and  for  regulating  the  value  and  alloy  of  coin. 

It  is  hereby  ordained  by  the  United  States  in  Congress 
assembled,  that  a  mint  be  established  for  the  coinage  of  gold, 
silver  and  copper  Money,  agreeably  to  the  resolves  of  Congress 
of  the  8th  August  last,  under  the  direction  of  the  following 
officers,  viz. 

An  Assay-Master,  whose  duty  it  shall  be  to  receive  gold  and 
silver  in  bullion,  or  foreign  coin,  to  assay  the  same  and  to 
give  his  certificates  for  the  value  thereof  at  the  following  rates  : 

For  every  pound  troy  weight  of  uncoined  gold  or  foreign  gold 
coin,  1 1  parts  fine  and  one  part  alloy,  209  dollars,  7  dimes  and 
7  cents,  Money  of  the  United  States,  as  established  by  the 
resolves  of  Congress  of  the  8th  of  August  last,  and  so  in  pro- 
portion to  the  fine  gold  contained  in  any  coined  or  uncoined 
gold  whatsoever. 

For  every  pound  troy  weight  of  uncoined  silver,  or  foreign 
silver  coin,  n  parts  fine  and  one  part  alloy,  13  dollars,  7  dimes, 
7  cents  and  7  mills,  money  of  the  United  States,  established  as 
aforesaid  ;  and  so  in  proportion  to  the  fine  silver  contained  in 
any  coined  or  uncoined  silver  whatsoever. 

A  Master  Coiner,  whose  duty  it  shall  be  to  receive,  from 
time  to  time,  of  the  assay-master,  the  bullion  necessary  for 
coinage  ;  to  report  to  Congress  devices  and  proofs  of  the  pro- 
posed pieces  of  coin,  and  to  procure  proper  workmen  to 
execute  the  business  of  coinage,  reporting,  from  time  to  time, 
to  the  commissioners  of  the  board  of  treasury  of  the  United 

1  Misprint  in  original.     See  the  ordinance  on  next  page. 


456  CONTEST  FOR  SOUND  MONEY 

States  for  approbation,  and  allowance,  the  occupation,  number 
and  pay  of  the  persons  so  employed. 

A  Pay-Master,  who  shall  be  the  treasurer  of  the  United 
States  for  the  time  being,  whose  duty  it  shall  be  to  receive  and 
take  charge  of  the  coin  made  under  the  direction  of  the  master 
coiner,  and  to  receipt  for  the  same ;  to  receive  and  duly  enter 
the  certificates  for  uncoined  gold  or  silver  issued  by  the  assay- 
master,  and  to  pay  y9-^  of  the  amount  thereof  in  gold  or  silver, 
and  yf^  in  the  copper  coin  of  the  United  States. 

*###♦**#** 

That  the  copper  coin  struck  under  the  authority  of  the 
United  States  in  Congress  assembled,  shall  be  receivable  in  all 
taxes,  or  payments  due  to  the  United  States,  in  the  proportion 
of  5  dollars  for  every  hundred  dollars  so  paid ;  but  that  no 
other  copper  coin  whatsoever,  shall  be  receivable  in  any  taxes 
or  payments  whatsoever  to  the  United  States. 

And  whereas,  the  great  quantities  of  base  copper  coin  daily 
imported  into,  or  manufactured  within  the  several  states  is 
become  so  highly  injurious  to  the  interest  and  commerce  of  the 
same,  as  to  require  the  immediate  interposition  of  the  powers 
vested  by  the  confederation  in  the  United  States  in  Congress 
assembled,  of  regulating  the  value  of  copper,  the  coin  so  cur- 
rent as  aforesaid  : 

It  is  hereby  ordained,  That  no  foreign  copper  coin  whatso- 
ever, shall,  after  the  first  day  of  September,  1787,  be  current 
within  the  U.  States  of  America:  And  that  no  copper  coin 
struck  under  the  authority  of  a  particular  state,  shall  pass  at  a 
greater  value  than  one  Federal  dollar  for  two  pounds  and  one 
quarter  of  a  pound,  avoirdupois  weight,  of  such  copper  coin. 


CONSTITUTION  OF  THE  UNITED  STATES 

Art.  1,  Sec.  8,  Par.  5.  The  Congress  shall  have  power 
...  to  coin  money,  regulate  the  value  thereof,  and  of  foreign 
coin,  and  fix  the  standard  of  weights  and  measures. 

Art.  1,  Sec.  10,  Par.  i.  No  state  shall  .  ...  coin  money; 
emit  bills  of  credit;  make  anything  but  gold  and  silver  coin 
a  tender  in  payment  of  debts ;  .  .  . 

Act  of  February  25,  1791  —  To  incorporate  the  subscribers  to 
the  Bank  of  the  United  States 

Whereas,  It  is  conceived  that  the  establishment  of  a  bank 
for  the  United  States,  upon  a  foundation  sufficiently  extensive 


APPENDIX  457 

to  answer  the  purposes  intended  thereby,  and  at  the  same  time 
upon  the  principles  which  afford  adequate  security  for  an 
upright  and  prudent  administration  thereof,  will  be  very  condu- 
cive to  the  successful  conducting  of  the  national  finances ;  will 
tend  to  give  facility  to  the  obtaining  of  loans,  for  the  use  of  the 
Government,  in  sudden  emergencies ;  and  will  be  productive 
of  considerable  advantages  to  trade  and  industry  in  general : 
Therefore, 

Sec.  i.  Be  it  enacted,  etc.,  That  a  Bank  of  the  United  States 
shall  be  established  ;  the  capital  stock  whereof  shall  not  exceed 
$10,000,000,  divided  into  25,000  shares,  each  share  being 
$400  ;  and  that  subscriptions  towards  constituting  the  said  stock, 
shall,  on  the  first  Monday  of  April  next,  be  opened  at  the  city  of 
Philadelphia,  under  the  superintendence  of  such  persons,  not 
less  than  three,  as  shall  be  appointed  for  that  purpose  by  the 
President  of  the  United  States  (who  is  hereby  empowered  to 
appoint  the  said  persons  accordingly) ;  which  subscriptions 
shall  continue  open  until  the  whole  of  the  said  stock  shall  have 
been  subscribed. 

Sec.  2.  That  it  shall  be  lawful  for  any  person,  copartnership, 
or  body  politic,  to  subscribe  for  such  or  so  many  shares  as  he, 
she  or  they  shall  think  fit,  not  exceeding  1,000,  except  as  shall 
be  hereafter  directed  relatively  to  the  United  States ;  and  that 
the  sums  respectively  subscribed,  except  on  behalf  of  the 
United  States,  shall  be  payable  one-fourth  in  gold  and  silver, 
and  three-fourths  in  that  part  of  the  public  debt,  which, 
according  to  the  loan  proposed  in  the  fourth  and  fifteenth  sec- 
tions of  the  act,  entitled  "  An  act  making  provision  for  the 
debt  of  the  United  States,"  shall  bear  an  accruing  interest,  at 
the  time  of  payment,  of  6  per  centum  per  annum,  and  shall  also 
be  payable  in  four  equal  parts,  in  the  aforesaid  ratio  of  specie 
to  debt,  at  the  distance  of  six  calendar  months  from  each 
other ;  the  first  whereof  shall  be  paid  at  the  time  of  subscrip- 
tion. 

Sec.  3.  That  all  those,  who  shall  become  subscribers  to  the 
said  bank,  their  successors  and  assigns,  shall  be,  and  are 
hereby  created  and  made  a  corporation  and  body  politic,  by 
the  name  and  style  of  The  President,  Directors  and  Company, 
of  the  Bank  of  the  United  States ;  and  shall  so  continue,  until 
the  fourth  day  of  March,  181 1  :  and  by  that  name,  shall  be, 
and  are  hereby  made  able  and  capable  in  law,  to  have,  pur- 
chase, receive,  possess,  enjoy,  and  retain  to  them  and  their 
successors,  lands,  rents,  tenement,  hereditaments,  goods, 
chattels  and  effects  of  what  kind,  nature  or  quality  soever,  to 
an  amount,  not  exceeding  in    the   whole   fifteen   millions   of 


458  CONTEST  FOR  SOUND  MONEY 

dollars,  including  the  amount  of  the  capital  stock  aforesaid ; 
and  the  same  to  sell,  grant,  demise,  aliene  or  dispose  of;  to 
sue  and  be  sued,  plead  and  be  impleaded,  answer  and  be 
answered,  defend  and  be  defended,  in  courts  of  record,  or  any 
other  place  whatsoever :  and  also  to  make,  have,  and  use 
a  common  seal,  and  the  same  to  break,  alter  and  renew,  at 
their  pleasure ;  and  also  to  ordain,  establish,  and  put  in 
execution,  such  by-laws,  ordinances  and  regulations,  as  shall 
seem  necessary  and  convenient  for  the  government  of  the  said 
corporation,  not  being  contrary  to  law,  or  to  the  constitution 
thereof  (for  which  purpose,  general  meetings  of  the  stockhold- 
ers shall  and  may  be  called  by  the  directors,  and  in  the  manner 
herein  after  specified),  and  generally  to  do  and  execute  all  and 
singular  acts,  matters  and  things,  which  to  them  it  shall  or  may 
appertain  to  do  ;  subject  nevertheless  to  the  rules,  regulations, 
restrictions,  limitations  and  provisions  herein  after  prescribed 
and  declared. 

Sec.  4.  That,  for  the  well  ordering  of  the  affairs  of  the  said 
corporation,  there  shall  be  25  directors ;  of  whom  there  shall 
be  an  election  on  the  first  Monday  of  January  in  each  year,  by 
the  stockholders  or  proprietors  of  the  capital  stock  of  the  said 
corporation,  and  by  plurality  of  the  votes  actually  given ;  and 
those  who  shall-  be  duly  chosen  at  any  election,  shall  be  capa- 
ble of  serving  as  directors,  by  virtue  of  such  choice,  until  the 
end  or  expiration  of  the  Monday  of  January  next  ensuing  the 
time  of  such  election,  and  no  longer.  And  the  said  directors, 
at  their  first  meeting  after  each  election,  shall  choose  one  of 
their  number  as  president. 

Sec.  5.  Provided  always,  That,  as  soon  as  the  sum  of 
$400,000,  in  gold  and  silver,  shall  have  been  actually  received 
on  account  of  the  subscriptions  to  the  said  stock,  notice 
thereof  shall  be  given,  by  the  persons  under  whose  superin- 
tendence the  same  shall  have  been  made,  in  at  least  two  public 
gazettes  printed  in  the  city  of  Philadelphia ;  and  the  said  per- 
sons shall,  at  the  same  time  in  like  manner,  notify  a  time  and 
place  within  the  said  city,  at  the  distance  of  90  days  from  the 
time  of  such  notification,  for  proceeding  to  the  election  of 
directors ;  and  it  shall  be  lawful  for  such  election  to  be  then 
and  there  made ;  and  the  persons,  who  shall  then  and  there  be 
chosen,  shall  be  the  first  directors,  and  shall  be  capable  of 
serving,  by  virtue  of  such  choice,  until  the  end  or  expiration 
of  the  Monday  in  January  next  ensuing  the  time  of  making  the 
same,  and  shall  forthwith  thereafter  commence  the  operations 
of  the  said  bank,  at  the  said  city  of  Philadelphia.  And  pro- 
vided further,  That,  in  case  it  should  at  any  time  happen,  that 


APPENDIX  459 

an  election  of  directors  should  not  be  made  upon  any  day 
when  pursuant  to  this  act  it  ought  to  have  been  made,  the  said 
corporation  shall  not,  for  that  cause,  be  deemed  to  be  dis- 
solved ;  but  it  shall  be  lawful,  on  any  other  day,  to  hold  and 
make  an  election  of  directors  in  such  manner  as  shall  have 
been  regulated  by  the  laws  and  ordinances  of  the  said  corpora- 
tion. And  provided  lastly,  That,  in  case  of  the  death,  resigna- 
tion, absence  from  the  United  States,  or  removal  of  a  director 
by  the  stockholders,  his  place  may  be  filled  up,  by  a  new 
choice,  for  the  remainder  of  the  year. 

Sec.  6.  That  the  directors  for  the  time  being  shall  have 
power  to  appoint  such  officers,  clerks,  and  servants  under 
them,  as  shall  be  necessary  for  executing  the  business  of  the 
said  corporation,  and  to  allow  them  such  compensation,  for 
their  services  respectively,  as  shall  be  reasonable ;  and  shall 
be  capable  of  exercising  such  other  powers  and  authorities,  for 
the  well  governing  and  ordering  of  the  affairs  of  the  said  corpo- 
ration, as  shall  be  described,  fixed,  and  determined  by  the  laws, 
regulations,  and  ordinances  of  the  same. 

Sec.  7.  That  the  following  rules,  restrictions,  limitations 
and  provisions,  shall  form  and  be  fundamental  articles  of  the 
constitution  of  the  said  corporation,  viz. 

I.  The  number  of  votes  to  which  each  stockholder  shall  be 
entitled,  shall  be  according  to  the  number  of  shares  he  shall 
hold,  in  the  proportions  following :  That  is  to  say,  for  1  share, 
and  not  more  than  2  shares,  one  vote  :  for  every  2  shares  above 
2,  and  not  exceeding  10,  one  vote  :  for  every  4  shares  above  10, 
and  not  exceeding  30,  one  vote  :  for  every  6  shares  above  30, 
and  not  exceeding  60,  one  vote  :  for  every  8  shares  above 
60,  and  not  exceeding  100,  one  vote  :  and  for  every  10  shares 
above  100,  one  vote  :  —  But  no  person,  co-partnership,  or  body 
politic  shall  be  entitled  to  a  greater  number  than  30  votes. 
And  after  the  first  election,  no  share  or  shares  shall  confer 
a  right  of  suffrage,  which  shall  not  have  been  holden  three 
calendar  months  previous  to  the  day  of  election.  Stock- 
holders actually  resident  within  the  United  States,  and  none 
other,  may  vote  in  elections  by  proxy. 

II.  Not  more  than  three  fourths  of  the  directors  in  office, 
exclusive  of  the  president,  shall  be  eligible  for  the  next  suc- 
ceeding year  :  but  the  director,  who  shall  be  president  at  the 
time  of  an  election,  may  always  be  re-elected. 

III.  None  but  a  stockholder,  being  a  citizen  of  the  United 
States,  shall  be  eligible  as  a  director. 

IV.  No  director  shall  be  entitled  to  any  emolument  unless 
the  same  shall  have  been  allowed  by  the  stockholders  at  a 


460  CONTEST  FOR  SOUND  MONEY 

general  meeting.  The  stockholders  shall  make  such  compen- 
sation to  the  president,  for  his  extraordinary  attendance  at  the 
bank,  as  shall  appear  to  them  reasonable. 

V.  Not  less  than  seven  directors  shall  constitute  a  board  for 
the  transaction  of  business,  of  whom,  the  president  shall  always 
be  one,  except  in  case  of  sickness,  or  necessary  absence ;  in 
which  case  his  place  may  be  supplied  by  any  other  director, 
whom  he,  by  writing  under  his  hand,  shall  nominate  for  the 
purpose. 

VI.  Any  number  of  stockholders,  not  less  than  60,  who,  to- 
gether, shall  be  proprietors  of  200  shares  or  upwards,  shall  have 
power  at  any  time  to  call  a  general  meeting  of  the  stockholders, 
for  purposes  relative  to  the  institution,  giving  at  least  ten  weeks 
notice,  in  two  public  gazettes  of  the  place  where  the  bank  is 
kept,  and  specifying,  in  such  notice,  the  object  or  objects  of 
such  meeting. 

VII.  Every  cashier  or  treasurer,  before  he  enters  upon  the 
duties  of  his  office,  shall  be  required  to  give  bond,  with  two  or 
more  sureties,  to  the  satisfaction  of  the  directors,  in  a  sum  not 
less  than  $50,000,  with  condition  for  his  good  behavior. 

VIII.  The  lands,  tenements  and  hereditaments  which  it  shall 
be  lawful  for  the  said  corporation  to  hold,  shall  be  only  such  as 
shall  be  requisite  for  its  immediate  accommodation  in  relation  to 
the  convenient  transacting  of  its  business,  and  such  as  shall 
have  been  bona  fide  mortgaged  to  it  by  way  of  security,  or  con- 
veyed to  it  in  satisfaction  of  debts  previously  contracted  in  the 
course  of  its  dealings,  or  purchased  at  sales  upon  judgments 
which  shall  have  been  obtained  for  such  debts. 

IX.  The  total  amount  of  the  debts,  which  the  said  corpora- 
tion shall  at  any  time  owe,  whether  by  bond,  bill,  note,  or  other 
contract,  shall  not  exceed  the  sum  of  $10,000,000,  over  and  above 
the  monies  then  actually  deposited  in  the  bank  for  safe  keeping, 
unless  the  contracting  of  any  greater  debt  shall  have  been  pre- 
viously authorized  by  a  law  of  the  United  States.  In  case  of 
excess,  the  directors,  under  whose  administration  it  shall  hap- 
pen, shall  be  liable  for  the  same,  in  their  natural  and  private 
capacities  ;  and  an  action  of  debt  may,  in  such  case,  be  brought 
against  them,  or  any  of  them,  their  or  any  of  their  heirs,  exec- 
utors or  administrators,  in  any  court  of  record  of  the  United 
States,  or  of  either  of  them,  by  any  creditor  or  creditors  of  the 
said  corporation,  and  may  be  prosecuted  to  judgment  and  exe- 
cution ;  any  condition,  covenant,  or  agreement  to  the  contrary 
notwithstanding.  But  this  shall  not  be  construed  to  exempt  the 
said  corporation,  or  the  lands,  tenements,  goods  or  chattels  of 
the  same,  from  being  also  liable  for  and  chargeable  with  the 


APPENDIX  46 1 

said  excess.  Such  of  the  said  directors,  who  may  have  been 
absent  when  the  said  excess  was  contracted  or  created,  or  who 
may  have  dissented  from  the  resolution  or  act  whereby  the 
same  was  so  contracted  or  created,  may  respectively  exonerate 
themselves  from  being  so  liable,  by  forthwith  giving  notice  of 
the  fact,  and  of  their  absence  or  dissent,  to  the  President  of  the 
United  States,  and  to  the  stockholders,  at  a  general  meeting, 
which  they  shall  have  power  to  call  for  that  purpose. 

X.  The  said  corporation  may  sell  any  part  of  the  public  debt 
whereof  its  stock  shall  be  composed,  but  shall  not  be  at  liberty 
to  purchase  any  public  debt  whatsoever ;  nor  shall  directly  or 
indirectly  deal  or  trade  in  any  thing,  except  bills  of  exchange, 
gold  or  silver  bullion,  or  in  the  sale  of  goods  really  and  truly 
pledged  for  money  lent  and  not  redeemed  in  due  time;  or  of 
goods  which  shall  be  the  produce  of  its  lands.  Neither  shall 
the  said  corporation  take  more  than  at  the  rate  of  6  per  centum 
per  annum,  for  or  upon  its  loans  or  discounts. 

XL  No  loan  shall  be  made  by  the  said  corporation,  for  the 
use  or  on  account  of  the  Government  of  the  United  States,  to 
an  amount  exceeding  $100,000,  or  of  any  particular  State,  to  an 
amount  exceeding  $50,000,  or  of  any  foreign  prince  or  state,  un- 
less previously  authorized  by  a  law  of  the  United  States. 

XII.  The  stock  of  the  said  corporation  shall  be  assignable 
and  transferable,  according  to  such  rules  as  shall  be  instituted 
in  that  behalf,  by  the  laws  and  ordinances  of  the  same. 

XIII.  The  bills  obligatory  and  of  credit,  under  the  seal  of  the 
said  corporation,  which  shall  be  made  to  any  person  or  persons, 
shall  be  assignable  by  indorsement  thereupon,  under  the  hand 
or  hands  of  such  person  or  persons,  and  of  his,  her,  or  their 
assignee  or  assignees,  and  so  as  absolutely  to  transfer  and  vest 
the  property  thereof  in  each  and  every  assignee  or  assignees 
successively,  and  to  enable  such  assignee  or  assignees  to  bring 
and  maintain  an  action  thereupon  in  his,  her,  or  their  own  name 
or  names.  And  bills  or  notes,  which  may  be  issued  by  order  of 
the  said  corporation,  signed  by  the  president,  and  countersigned 
by  the  principal  cashier  or  treasurer  thereof,  promising  the  pay- 
ment of  money  to  any  person  or  persons,  his,  her,  or  their  order, 
or  to  bearer,  though  not  under  the  seal  of  the  said  corporation, 
shall  be  binding  and  obligatory  upon  the  same,  in  the  like  man- 
ner, and  with  the  like  force  and  effect,  as  upon  any  private  per- 
son or  persons,  if  issued  by  him  or  them,  in  his,  her,  or  their 
private  or  natural  capacity  or  capacities ;  and  shall  be  assign- 
able and  negotiable,  in  like  manner,  as  if  they  were  so  issued  by 
such  private  person  or  persons  —  that  is  to  say,  those  which 
shall  be  payable  to  any  person  or  persons,  his,  her,  or  their  order, 


462  CONTEST  FOR  SOUND  MONEY 

shall  be  assignable  by  indorsement,  in  like  manner,  and  with  the 
like  effect,  as  foreign  bills  of  exchange  now  are  ;  and  those  which 
are  payable  to  bearer,  shall  be  negotiable  and  assignable  by  de- 
livery only. 

XIV.  Half  yearly  dividends  shall  be  made  of  so  much  of  the 
profits  of  the  bank,  as  shall  appear  to  the  directors  advisable  ; 
and  once  in  every  three  years,  the  directors  shall  lay  before  the 
stockholders,  at  a  general  meeting,  for  their  information,  an  exact 
and  particular  statement  of  the  debts,  which  shall  have  remained 
unpaid  after  the  expiration  of  the  original  credit,  for  a  period 
of  treble  the  term  of  that  credit ;  and  of  the  surplus  of  profit, 
if  any,  after  deducting  losses  and  dividends.  If  there  shall  be 
a  failure  in  the  co-partnership,  or  body  politic,  the  party  failing 
shall  lose  the  benefit  of  any  dividend,  which  may  have  accrued, 
prior  to  the  time  for  making  such  payment,  and  during  the  delay 
of  the  same. 

XV.  It  shall  be  lawful  for  the  directors  aforesaid,  to  establish 
offices  wheresoever  they  shall  think  fit,  within  the  United  States, 
for  the  purposes  of  discount  and  deposit  only,  and  upon  the 
same  terms,  and  in  the  same  manner,  as  shall  be  practised  at 
the  bank ;  and  to  commit  the  management  of  the  said  offices, 
and  the  making  of  the  said  discounts,  to  such  persons,  under 
such  agreements,  and  subject  to  such  regulations  as  they  shall 
deem  proper  ;  not  being  contrary  to  law,  or  to  the  constitution 
of  the  bank. 

XVI.  The  officer  at  the  head  of  the  Treasury  Department  of 
the  United  States,  shall  be  furnished,  from  time  to  time,  as  often  as 
he  may  require,  not  exceeding  once  a  week,  with  statements  of 
the  amount  of  the  capital  stock  of  the  said  corporation,  and 
of  the  debts  due  to  the  same  ;  of  the  monies  deposited  therein  ; 
of  the  notes  in  circulation,  and  of  the  cash  in  hand ;  and  shall 
have  a  right  to  inspect  such  general  accounts  in  the  books  of 
the  bank,  as  shall  relate  to  the  said  statements.  Provided,  That 
this  shall  not  be  construed  to  imply  a  right  of  inspecting  the 
account  of  any  private  individual  or  individuals  with  the  bank. 

Sec.  8.  That  if  the  said  corporation,  or  any  person  or  per- 
sons for  or  to  the  use  of  the  same,  shall  deal  or  trade  in  buying 
or  selling  any  goods,  wares,  merchandise,  or  commodities  what- 
soever, contrary  to  the  provisions  of  this  act,  all  and  every  per- 
son and  persons,  by  whom  any  order  or  direction  for  so  dealing 
or  trading  shall  have  been  given,  and  all  and  every  person  and 
persons  who  shall  have  been  concerned  as  parties  or  agents 
therein,  shall  forfeit  and  lose  treble  the  value  of  the  goods, 
wares,  merchandises,  and  commodities,  in  which  such  dealing 
and  trade  shall  have  been ;  one-half  thereof  to  the  use  of  the 


APPENDIX  463 

informer,  and  the  other  half  thereof  to  the  use  of  the  United 
States,  to  be  recovered  with  costs  of  suit. 

Sec.  9.  That  if  the  said  corporation  shall  advance  or  lend 
any  sum,  for  the  use  or  on  account  of  the  Government  of  the 
United  States,  to  an  amount  exceeding  $100,000  ;  or  of  any  par- 
ticular State  to  an  amount  exceeding  $50,000 ;  or  of  any 
foreign  prince  or  state,  (unless  previously  authorized  thereto  by 
a  law  of  the  United  States,)  all  and  every  person  and  persons, 
by  and  with  whose  order,  agreement,  consent,  approbation,  or 
connivance,  such  unlawful  advance  or  loan  shall  have  been  made, 
upon  conviction  thereof,  shall  forfeit  and  pay,  for  every  such 
offence,  treble  the  value  or  amount  of  the  sum  or  sums  which 
shall  have  been  so  unlawfully  advanced  or  lent ;  one  fifth  thereof 
to  the  use  of  the  informer,  and  the  residue  thereof  to  the  use 
of  the  United  States  ;  to  be  disposed  of  by  law  and  not  otherwise. 

Sec.  10.  That  the  bills  or  notes  of  the  said  corporation, 
originally  made  payable,  or  which  shall  have  become  payable  on 
demand,  in  gold  and  silver  coin,  shall  be  receivable  in  all  pay- 
ments to  the  United  States.1 

Sec.  ti.  That  it  shall  be  lawful  for  the  President  of  the 
United  States,  at  any  time  or  times,  within  18  months  after  the 
first  day  of  April  next,  to  cause  a  subscription  to  be  made  to 
the  stock  of  the  said  corporation,  as  part  of  the  aforesaid  capi- 
tal stock  of  $10,000,000,  on  behalf  of  the  United  States,  to  an 
amount  not  exceeding  $2,000,000  ;  to  be  paid  out  of  the  monies 
which  shall  be  borrowed  by  virtue  of  either  of  the  acts,  the  one 
entitled  "  An  act  making  provision  for  the  debt  of  the  United 
States  ; "  and  the  other  entitled  "  An  act  making  provision  for 
the  reduction  of  the  public  debt ;  "  borrowing  of  the  bank  an 
equal  sum,  to  be  applied  to  the  purposes  for  which  the  said 
monies  shall  have  been  procured  ;  reimbursable  in  ten  years,  by 
equal  annual  instalments ;  or  at  any  time  sooner,  or  in  any 
greater  proportions,  that  the  Government  may  think  fit. 

Sec.  12.  That  no  other  bank  shall  be  established  by  any 
future  law  of  the  United  States,  during  the  continuance  of  the 
corporation  hereby  created ;  for  which  the  faith  of  the  United 
States  is  hereby  pledged. 

Act  of  April  2,  1792  —  Establishing  a  mint  and  reflating  the 
Coins  of  the  United  States 

Section  i.  Be  it  enacted,  etc.,  That  a  mint  for  the  purpose 
of  a  national  coinage  be,  and  the  same  is  established ;  to  be 

1This  section  was  repealed  March  19,  181 2,  after  the  expiration  of  the 
charter. 


464  CONTEST  FOR  SOUND  MONEY 

situate  and  carried  on  at  the  seat  of  the  government  of  the 
United  States,  for  the  time  being :  And  that  for  the  well  con- 
ducting of  the  business  of  the  said  mint,  there  shall  be  the  fol- 
lowing officers  and  persons,  namely :  a  Director,  an  Assayer,  a 
Chief  Coiner,  an  Engraver,  a  Treasurer. 

[Secs.  2  to  8  relate  to  the  duties  of  the  several  mint  officers, 
their  oaths,  bonds,  salaries,  and  accounts,  and  the  establishment 
and  maintenance  of  the  mint] 

Sec.  9.  That  there  shall  be  from  time  to  time  struck  and 
coined  at  the  said  mint,  coins  of  gold,  silver,  and  copper,  of  the 
following  denominations,  values  and  descriptions,  viz.  Eagles  — 
each  to  be  of  the  value  of  10  dollars  or  units,  and  to  contain 
247^  grains  of  pure,  or  270  grains  of  standard  gold.  Half 
Eagles  —  each  to  be  of  the  value  of  5  dollars,  and  to  contain 
123I  grains  of  pure,  or  135  grains  of  standard  gold.  Quarter 
Eagles  —  each  to  be  of  the  value  of  2\  dollars,  and  to  contain 
6i£  grains  of  pure,  or  67I  grains  of  standard  gold.1  Dollars  or 
units —  each  to  be  of  the  value  of  a  Spanish  milled  dollar  as  the 
same  is  now  current,  and  to  contain  37iT4g-  grains  of  pure,  or 
416  grains  of  standard  silver.  Half  Dollars  —  each  to  be  of  half 
the  value  of  the  dollar  or  unit,  and  to  contain  185-}- J?-  grains  of 
pure,  or  208  grains  of  standard  silver.  Quarter  Dollars  —  each 
to  be  of  one-fourth  the  value  of  the  dollar  or  unit,  and  to  con- 
tain 9  2  if  grains  of  pure,  or  104  grains  of  standard  silver. 
Dismes  —  each  to  be  of  the  value  of  one-tenth  of  a  dollar  or 
unit,  and  to  contain  37y2ff  grains  of  pure,  or  41^  grains  of  standard 
silver.  Half  Dismes  —  each  to  be  of  the  value  of  one-twentieth 
of  a  dollar,  and  to  contain  i8T9g  grains  of  pure,  or  2o|  grains  of 
standard  silver.  Cents  —  each  to  be  of  the  value  of  the  one- 
hundredth  part  of  a  dollar,  and  to  contain  n  pennyweights 
of  copper.  Half  Cents  — each  to  be  of  the  value  of  half  a 
cent,  and  to  contain  5^  pennyweights  of  copper. 

[Sec.  10  specifies  the  devices  to  appear  upon  the  coins 
authorized.] 

Sec.  11.  That  the  proportional  value  of  gold  to  silver  in  all 
coins  which  shall  by  law  be  current  as  money  within  the  United 
States,  shall  be  as  15  to  i,2  according  to  quantity  in  weight,  of 
pure  gold  or  pure  silver ;  that  is  to  say,  every  15  pounds  weight 
of  pure  silver  shall  be  of  equal  value  in  all  payments,  with 


1  Act  of  March  3,  1849,  provides  for  coinage  of  gold  dollars  and  double 
eagles.  Act  of  February  21,  1853,  provided  for  $3  piece.  Act  of  Sep- 
tember 26,  1890,  abolished  coinage  of  $3  and  $1  pieces. 

2  For  change  of  coinage  ratio,  see  Act  of  June  28,  1834,  and  Act  of 
January  18,  1837,  Secs.  8,  9,  10. 


APPENDIX  465 

1  pound  weight  of  pure  gold,  and  so  in  proportion  as  to  any 
greater  or  less  quantities  of  the  respective  metals. 

Sec.  12.  That  the  standard  for  all  gold  coins  of  the  United 
States  shall  be  1 1  parts  fine  to  1  part  alloy ;  and  accordingly 
that  11  parts  in  12  of  the  entire  weight  of  each  of  the  said 
coins  shall  consist  of  pure  gold,1  and  the  remaining  one-twelfth 
part  of  alloy  ;  and  the  said  alloy  shall  be  composed  of  silver 
and  copper,  in  such  proportions  not  exceeding  one-half  silver 
as  shall  be  found  convenient ;  to  be  regulated  by  the  director 
of  the  mint,  for  the  time  being,  with  the  approbation  of  the 
President  of  the  United  States,  until  further  provision  shall  be 
made  by  law.  And  to  the  end  that  the  necessary  information 
may  be  had  in  order  to  the  making  of  such  further  provision, 
it  shall  be  the  duty  of  the  director  of  the  mint  at  the  expiration 
of  a  year  after  commencing  the  operations  of  the  said  mint  to 
report  to  Congress  the  practice  thereof  during  the  said  year, 
touching  the  composition  of  the  alloy  of  the  said  gold  coins, 
the  reasons  for  such  practice,  and  the  experiments  and  obser- 
vations which  shall  have  been  made  concerning  the  effects  of 
different  proportions  of  silver  and  copper  in  the   said   alloy. 

Sec.  13.  That  the  standard  of  all  silver  coins  of  the  United 
States  shall  be  1485  parts  fine  to  179  parts  alloy;  and  accord- 
ingly that  1485  parts  in  1664  parts  of  the  entire  weight  of  each 
of  the  said  coins  shall  consist  of  pure  silver,  and  the  remaining 
1 79  parts  of  alloy ;  which  alloy  shall  be  wholly  of  copper. 

Sec.  14.  That  it  shall  be  lawful  for  any  person  or  persons 
to  bring  to  the  said  mint  gold  and  silver  bullion,  in  order  to  their 
being  coined  ;  and  that  the  bullion  so  brought  shall  be  there 
assayed  and  coined  as  speedily  as  may  be  after  the  receipt 
thereof,  and  that  free  of  expense  to  the  person  or  persons  by 
whom  the  same  shall  have  been  brought.2  And  as  soon  as  the 
said  bullion  shall  have  been  coined,  the  person  or  persons  by 
whom  the  same  shall  have  been  delivered,  shall  upon  demand, 
receive  in  lieu  thereof  coins  of  the  same  species  of  bullion 
which  shall  have  been  so  delivered,  weight  for  weight,  of  the 
pure  gold  or  pure  silver  therein  contained  :  Proirided  neverthe- 
less, That  it  shall  be  at  the  mutual  option  of  the  party  or  parties 
bringing  such  bullion,  and  of  the  director  of  the  said  mint,  to 

1  See  Act  of  January  18,  1837,  Sec.  8,  establishing  a  uniform  standard 
of  fineness  of  .900. 

2  The  retention  of  sufficient  bullion  to  cover  expenses  of  refining 
directed  by  Act  of  March  3,  1795,  Sec.  5  ;  Act  of  May  27,  1796  ;  and 
Act  of  April  24,  1800.  The  Act  of  February  12,  1873,  fixed  a  coinage 
charge  on  gold  of  \  of  one  per  cent :  this  was  repealed  by  Act  of  January 
14,  1875. 

2H 


466  CONTEST  FOR  SOUND  MONEY 

make  an  immediate  exchange  of  coins  for  standard  bullion, 
with  a  deduction  of  one-half  per  cent,  from  the  weight  of  the 
pure  gold,  or  pure  silver  contained  in  the  said  bullion,  as  an 
indemnification  to  the  mint  for  the  time  which  will  necessarily 
be  required  for  coining  the  said  bullion,  and  for  the  advance 
which  shall  have  been  so  made  in  coins.  And  it  shall  be  the 
duty  of  the  Secretary  of  the  Treasury  to  furnish  the  said  mint 
from  time  to  time  whenever  the  state  of  the  Treasury  will 
admit  thereof,  with  such  sums  as  may  be  necessary  for  effecting 
the  said  exchanges,  to  be  replaced  as  speedily  as  may  be  out 
of  the  coins  which  shall  have  been  made  of  the  bullion  for 
which  the  monies  so  furnished  shall  have  been  exchanged ;  and 
the  said  deduction  of  one-half  per  cent,  shall  constitute  a  fund 
towards  defraying  the  expenses  of  the  said  mint. 

Sec.  15.  That  the  bullion  which  shall  be  brought  as  afore- 
said to  the  mint  to  be  coined,  shall  be  coined,  and  the  equivalent 
thereof  in  coins  rendered,  if  demanded,  in  the  order  in  which 
the  said  bullion  shall  have  been  brought  or  delivered,  giving 
priority  according  to  priority  of  delivery  only,  and  without 
preference  to  any  person  or  persons ;  and  if  any  preference 
shall  be  given  contrary  to  the  direction  aforesaid,  the  officer  by 
whom  such  undue  preference  shall  be  given,  shall  in  each  case 
forfeit  and  pay  $1000;  to  be  recovered  with  costs  of  suit. 
And  to  the  end  that  it  may  be  known  if  such  preference  shall 
at  any  time  be  given,  the  assayer  or  officer  to  whom  the  said 
bullion  shall  be  delivered  to  be  coined,  shall  give  to  the  person 
or  persons  bringing  the  same,  a  memorandum  in  writing  under 
his  hand,  denoting  the  weight,  fineness  and  value  thereof, 
together  with  the  day  and  order  of  its  delivery  into  the  mint. 

Sec.  16.  That  all  the  gold  and  silver  coins  which  have  been 
struck  at,  and  issued  from  the  said  mint,  shall  be  a  lawful  ten- 
der in  all  payments  whatsoever,  those  of  full  weight  according 
to  the  respective  values  herein  before  declared,  and  those  of 
less  than  full  weight  at  values  proportional  to  their  respective 
weights. 

Sec.  1 7.  That  it  shall  be  the  duty  of  the  respective  officers 
of  the  said  mint,  carefully  and  faithfully  to  use  their  best 
endeavors  that  all  the  gold  and  silver  coins  which  shall  be 
struck  at  the  said  mint  shall  be,  as  nearly  as  may  be,  conform- 
able to  the  several  standards  and  weights  aforesaid,  and  that 
the  copper  whereof  the  cents  and  half  cents  aforesaid  may  be 
composed,  shall  be  of  good  quality. 

Sec.  18.  And  the  better  to  secure  a  due  conformity  of  the 
said  gold  and  silver  coins  to  their  respective  standards,  Be  it 
further  enacted,  That  from  every  separate   mass  of  standard 


APPENDIX  467 

gold  or  silver,  which  shall  be  made  into  coins  at  the  said  Mint, 
there  shall  be  taken,  set  apart  by  the  Treasurer  and  reserved  in 
his  custody  a  certain  number  of  pieces,  not  less  than  three, 
and  that  once  in  every  year  the  pieces  so  set  apart  and  re- 
served, shall  be  assayed  under  the  inspection  of  the  Chief 
Justice  of  the  United  States,  the  Secretary  and  Comptroller 
of  the  Treasury,  the  Secretary  for  the  Department  of  State, 
and  the  Attorney  General  of  the  United  States,  (who  are 
hereby  required  to  attend  for  that  purpose  at  the  said  Mint,  on 
the  last  Monday  in  July  in  each  year,)  or  under  the  inspection 
of  any  three  of  them,  in  such  manner  as  they  or  a  majority  of 
them  shall  direct,  and  in  the  presence  of  the  Director,  assayer 
and  chief  coiner  of  the  said  Mint ;  and  if  it  shall  be  found 
that  the  gold  and  silver  so  assayed,  shall  not  be  inferior  to  their 
respective  standards  herein  before  declared  more  than  1  part 
in  144  parts,  the  officer  or  officers  of  the  said  Mint  whom  it 
may  concern  shall  be  held  excusable ;  but  if  any  greater  in- 
feriority shall  appear,  it  shall  be  certified  to  the  President  of 
the  United  States,  and  the  said  officer  or  officers  shall  be 
deemed  disqualified  to  hold  their  respective  offices. 

Sec.  19.  That  if  any  of  the  gold  or  silver  coins  which  shall 
be  struck  or  coined  at  the  said  Mint  shall  be  debased  or  made 
worse  as  to  the  proportion  of  fine  gold  or  fine  silver  therein 
contained,  or  shall  be  of  less  weight  or  value  than  the  same 
ought  to  be  pursuant  to  the  directions  of  this  act,  through  the 
default  or  with  the  connivance  of  any  of  the  officers  or  persons 
who  shall  be  employed  at  the  said  Mint,  for  the  purpose  of 
profit  or  gain,  or  otherwise  with  a  fraudulent  intent,  and  if  any 
of  the  said  officers  or  persons  shall  embezzle  any  of  the  metals 
which  shall  at  any  time  be  committed  to  their  charge  for  the 
purpose  of  being  coined,  or  any  of  the  coins  which  shall  be 
struck  or  coined  at  the  said  Mint,  every  such  officer  or  person 
who  shall  commit  any  or  either  of  the  said  offences,  shall  be 
deemed  guilty  of  felony,  and  shall  suffer  death. 

Sec.  20.  That  the  money  of  account  of  the  United  States 
shall  be  expressed  in  dollars  or  units,  dismes  or  tenths,  cents  or 
hundredths,  and  milles  or  thousandths,  a  disme  being  a  tenth 
part  of  a  dollar,  a  cent  the  hundredth  part  of  a  dollar,  a  mille 
the  thousandth  part  of  a  dollar,  and  that  all  accounts  in  public 
offices  and  all  proceedings  in  the  courts  of  the  United  States 
shall  be  kept  and  had  in  conformity  to  this  regulation. 

Note  on  Minor  Coins 

Act  of  May  8,  1792  —  Provided  for  the  purchase  of  150  tons  of  copper 
for  coinage  into  cents  and  half  cents,  and  ordered  that  six  months  after 


468  CONTEST  FOR  SOUND  MONEY 

the  coinage  of  such  pieces  to  the  amount  of  550,000,  no  other  copper  coins 
were  to  be  paid  or  received  or  pass  current  as  money  under  penalty  of 
forfeiture  and  a  fine  of  $10  against  both  payer  and  receiver. 

Act  of  January  1 4,  1 793  —  Altered  weight  of  cent  to  208  grains,  half  cent 
to  104  grains. 

Act  of  March  3,  1795  —  Authorized  the  President  by  proclamation  to 
further  reduce  these  weights;  which  was  done  January  26,  1796.  The 
same  act  provided  for  the  distribution  of  these  coins  at  public  expense. 

Act  of  January  18, 1837,  Sec.  8  —  Fixes  weights  of  cent  and  half  cent  at 
168  and  84  grains  respectively. 

Act  of  March  3,  1851 — Provides  for  coinage  of  3-cent  piece  of 
I2|  grains,  75  per  cent,  silver,  25  per  cent,  copper,  to  be  legal  tender  up 
to  30  cents.     The  fineness  was  changed  to  .900  by  Act  of  March  3,  1853. 

Act  of  February  21,  1857  —  Reduces  weight  of  cent  to  72  grains,  88 
per  cent,  copper,  12  per  cent,  nickel;  coinage  of  half  cents  was  discon- 
tinued. 

Act  of  April  22,  1864 — Substituted  for  this  coin  a  bronze  cent  of  48 
grains,  composed  of  95  per  cent,  copper  and  5  per  cent,  of  tin  and  zinc, 
and  a  2-cent  piece  of  the  same  composition  and  of  twice  the  weight.  The 
cent  was  made  a  legal  tender  in  any  payment  to  the  amount  of  10  cents, 
the  2-cent  piece  to  the  amount  of  20  cents. 

Act  of  March  3,  1865  —  Provided  for  a  3-cent  piece  of  30  grains,  75  per 
cent,  copper,  25  per  cent,  nickel,  to  be  legal  tender  up  to  60  cents,  and 
fixed  the  legal  tender  power  of  1-  and  2-cent  pieces  at  4  cents. 

Act  of  May  16,  1866  —  Provides  for  a  5-cent  piece  of  7 7 y\j%  grains, 
75  per  cent,  copper,  25  per  cent,  nickel,  to  be  legal  tender  up  to  $1,  and  its 
redemption  in  sums  of  $100  or  more. 

Act  of  March  3,  1871  —  Authorized  redemption  of  all  minor  coins  in 
lawful  money  in  sums  of  not  less  than  $20. 

Act  of  February  12,  1873  —  Abolished  the  coinage  of  2-cent  pieces, 
and  made  minor  coin  legal  tender  up  to  25  cents. 

Act  of  September  26,  1890  —  Abolished  the  coinage  of  3-cent  pieces. 


Act  of  February  9,  1 793 1  —  Regulating  foreign  coins 

Sec.  1.  Be  it  enacted,  etc.,  That  from  and  after  the  first 
day  of  July  next,  foreign  gold  and  silver  coins  shall  pass  current 

1  The  subsequent  legislation  upon  this  subject  is  as  follows : 

Act  of  February  1,  1798  —  Suspends  section  2  of  above  act,  and  con- 
tinues for  three  years  from  January  1,  1798,  and  until  the  end  of  the 
next  session  of  Congress  thereafter,  the  legal  tender  quality  of  foreign 
gold  and  silver  coins  at  the  same  rates  as  per  section  1  of  the  act  of 
February  9,  1793. 

Act  of  April  30,  1802  —  Further  suspends  section  2  of  the  act  of  Feb- 
ruary 9,  1793.     Foreign  coins  continued  as  legal  tender  for  three  years. 

Act  of  April  10,  1806  —  Foreign  gold  and  silver  coins  to  be  current  and 
a  legal  tender  in  the  United  States  for  three  years  at  same  rates  as  by  act 
of  February  9,  1 793. 

Act  of  April  29,  1816 — Restores  legal  tender  character  of  foreign 
coins  for  three  years,  at  the  following  rates :  Gold  coins  of  Great  Britain 
and  Portugal,  100  cents  for  every  27  grains,  or  88|  cents  per  pennyweight; 
gold  coins  of  France,  100  cents  for  every  27^  grains,  or  87 £  cents  per 


APPENDIX  469 

as  money  within  the  United  States,  and  be  a  legal  tender  for 
the  payment  of  all  debts  and  demands,  at  the  several  and 
respective  rates  following,  and  not  otherwise,  viz.  :  The  gold 
coins  of  Great  Britain  and  Portugal,  of  their  present  standard, 
at  the  rate  of  100  cents  for  every  27  grains  of  the  actual 
weight   thereof;    the   gold   coins   of  France,  Spain  and   the 

pennyweight ;  gold  coins  of  Spain,  100  cents  for  every  28 \  grains,  or  84 
cents  per  pennyweight;  silver  crowns  of  France,  11 7.6  cents  per  ounce,  or 
no  cents  for  each  crown  weighing  18  pennyweights  17  grains;  5-franc 
pieces,  116  cents  per  ounce,  or  93.3  cents  for  each  5-franc  piece  weighing 
16  pennyweights  2  grains. 

Act  of  March  3,  1819  —  Continues  in  force  the  legal  tender  value  in 
the  United  States  of  foreign  gold  coins  at  the  rates  of  April  29,  1816, 
until  November  I,  1819;  "and  from  and  after  that  day  foreign  gold  coins 
shall  cease  to  be  a  tender  in  the  United  States  for  the  payment  of  debts 
or  demands."  Part  of  act  of  April  29,  181 6,  relating  to  silver  coins,  con- 
tinued in  force  until  April  29,  1821. 

Act  of  March  3,  1821  — Crown  and  5-franc  piece  of  France  continued 
as  legal  tender  until  April  29,  1823. 

Act  of  March  3,  1823  —  Continues  for  four  years  longer  the  legal  tender 
character  of  crowns  and  5-franc  pieces  of  France. 

Act  of  March  3,  1823  —  Gold  coins  of  Great  Britain,  Portugal,  France, 
and  Spain  to  be  received  in  payment  of  lands  bought  from  the  United 
States  at  the  rates  given  in  the  act  of  April  29,  1 81 6,  but  not  made  legal 
tender. 

Act  of  June  25,  1834  —  Certain  silver  coins  to  be  of  the  legal  value  and 
to  pass  by  tale,  the  dollars  of  Mexico,  Peru,  Chili,  and  Central  America,  of 
not  less  weight  than  415  grains,  and  restamped  dollars  of  Brazil  of  like 
weight,  fineness,  not  less  than  10  ounces  15  pennyweights  of  pure  silver  in 
Troy  pound  of  12  ounces  of  standard  silver,  at  100  cents  each;  the  5-franc 
piece  of  France,  weighing  not  less  than  384  grains,  at  93  cents. 

Act  of  June  28,  1834 — Regulates  the  legal  tender  value  of  certain  gold 
coins,  as  follows :  Great  Britain,  Portugal,  and  Brazil,  of  not  less  than  22 
carats  fine,  at  94.8  cents  per  pennyweight ;  those  of  France,  f%  fine,  93.1 
cents  per  pennyweight,  and  those  of  Spain,  Mexico,  and  Columbia,  of  20 
carats,  3  j76  grains  line,  at  89.9  cents  per  pennyweight. 

Act  of  March  3,  1843  —  Foreign  gold  coins  to  pass  current  "and  be 
receivable,  by  weight,  for  the  payment  of  all  debts  and  demands  "  at  the 
following  rates:  Those  of  Great  Britain,  not  less  than  .9155  fine,  94.6 
cents  per  pennyweight;  those  of  France,  of  not  less  than  .899  fine,  at  92.9 
cents  per  pennyweight. 

Silver  coins  at  the  following  rates:  Spanish  pillar  dollars  and  dollars 
of  Mexico,  Peru,  Bolivia,  not  less  than  .897  tine  and  415  grains  in  weight, 
at  100  cents  each;  5-franc  pieces  of  France,  not  less  than  .900  fine  and 
384  grains  in  weight,  at  93  cents  each. 

Act  of  February  21,  1857  —  Spanish  and  Mexican  coins,  known  as  the 
quarter,  eighth,  and  sixteenth  of  the  Spanish  pillar  dollar,  and  Mexican 
dollar,  to  be  received  by  the  United  States,  as  follows:  \  of  a  dollar,  or  2 
reals,  at  20  cents ;  J  of  a  dollar,  or  1  real,  at  10  cents ;  r,  of  a  dollar,  or 
\  real,  at  5  cents.  Said  coins  to  be  recoined  when  received.  Former  acts, 
making  foreign  coins  a  legal  tender,  repealed  ;  assays  of  foreign  coins  to 
be  made  by  the  Director  of  the  Mint  and  annually  reported. 


470  CONTEST  FOR  SOUND  MONEY 

dominions  of  Spain,  of  their  present  standard,  at  the  rate  of  ioo 
cents  for  every  27*  grains  of  the  actual  weight  thereof.  Spanish 
milled  dollars,  at  the  rate  of  100  cents  for  each  dollar,  the  actual 
weight  whereof  shall  not  be  less  than  17  pennyweights  and  7 
grains  ;  and  in  proportion  for  the  parts  of  a  dollar.  Crowns  of 
France,  at  the  rate  of  no  cents  for  each  crown,  the  actual 
weight  whereof  shall  be  not  less  than  18  pennyweights  and 
17  grains,  and  in  proportion  for  the  parts  of  a  crown.  But  no 
foreign  coin  that  may  have  been,  or  shall  be  issued  subsequent 
to  the  first  day  of  January,  1792,  shall  be  a  tender,  as  aforesaid, 
until  samples  thereof  shall  have  been  found,  by  assay,  at  the 
mint  of  the  United  States,  to  be  conformable  to  the  respective 
standards  required,  and  proclamation  thereof  shall  have  been 
made  by  the  President  of  the  United  States. 

Sec.  2.  Provided  always,  That  at  the  expiration  of  three 
years  next  ensuing  the  time  when  the  coinage  of  gold  and  sil- 
ver, agreeably  to  the  act,  entitled  "  An  act  establishing  a  mint, 
and  regulating  the  coins  of  the  United  States,"  shall  commence 
at  the  mint  of  the  United  States  (which  time  shall  be  an- 
nounced by  the  proclamation  of  the  President  of  the  United 
States),  all  foreign  gold  coins,  and  all  foreign  silver  coins, 
except  Spanish  milled  dollars  and  parts  of  such  dollars,  shall 
cease  to  be  a  legal  tender,  as  aforesaid. 

Sec.  3.  That  all  foreign  gold  and  silver  coins,  (except 
Spanish  milled  dollars,  and  parts  of  such  dollars,)  which  shall 
be  received  in  payment  for  monies  due  to  the  United  States, 
after  the  said  time,  when  the  coining  of  gold  and  silver  coins 
shall  begin  at  the  mint  of  the  United  States,  shall,  previously 
to  their  being  issued  in  circulation,  be  coined  anew,  in  con- 
formity to  the  act,  entitled  "  An  act  establishing  a  mint  and 
regulating  the  coins  of  the  United  States." 

[Sec.  4  repeals  Sec.  55  of  tariff  act  of  July  31,  1789, 
under  which  foreign  gold  and  silver  coins  were  received  for  dues 
and  fees  at  a  different  rating.] 

[Sec.  5  fixes  the  time  for  making  annual  assays.] 

Act  of  March  3,  1797,  authorized  the  receipt  of  evidences 
of  public  debt  in  payment  for  purchases  of  public  lands.  This 
was  repealed  by  the  act  of  April  18,  1806. 

Act  of  June  27,  1798  —  [Provides  penalties  of  imprisonment 
and  fine  for  altering,  forging  or  counterfeiting  the  bills  or  notes 
issued  by  the  Bank  of  the  United  States,  or  any  order  or  check 
on  the  cashier  or  corporation  for  the  payment  of  money.] 


APPENDIX  471 

Act  of  April  z\,  1806  —  [Provides  penalties  for  counterfeiting 
coins  of  the  United  States,  or  those  of  foreign  countries  made 
current  in  the  United  States  ;  for  importing  false  or  counterfeit 
coins  ;  and  for  impairing,  falsifying,  etc.,  the  coins  of  the  United 
States ;  not  to  interfere  with  the  jurisdiction  of  individual  states 
over  offences  made  punishable  by  this  act.] 

Act  of  June  30,  181 2  —  To  authorize  the  issuing  of  Treasury  notes 

Be  it  enacted,  etc.,  That  the  President  of  the  United  States  be, 
and  he  is  hereby  authorized  to  cause  Treasury  notes  for  such 
sum  or  sums  as  he  may  think  expedient,  but  not  exceeding  in 
the  whole  the  sum  of  $5,000,000  to  be  prepared,  signed  and 
issued  in  the  manner  hereinafter  provided. 

Sec.  2.  That  the  said  Treasury  notes  shall  be  reimbursed 
by  the  United  States,  at  such  places,  respectively,  as  may  be 
expressed  on  the  face  of  the  said  notes,  one  year,  respectively, 
after  the  day  on  which  the  same  shall  have  been  issued :  from 
which  day  of  issue  they  shall  bear  interest,  at  the  rate  of  5^ 
per  centum  a  year,  payable  to  the  owner  and  owners  of  such 
notes,  at  the  Treasury,  or  by  the  proper  commissioner  of  loans, 
at  the  places  and  times  respectively  designated  on  the  face  of 
said  notes  for  the  payment  of  principal. 

Sec.  3.  That  the  said  Treasury  notes  shall  be  respectively 
signed,  in  behalf  of  the  United  States,  by  persons  to  be  ap- 
pointed for  that  purpose  by  the  President  of  the  United  States  : 
two  of  which  persons  shall  sign  each  note,  and  shall  each  receive, 
as  a  compensation  for  that  service,  at  the  rate  of  $1.25  for  every 
100  notes  thus  signed  by  them  respectively  ;  and  the  said  notes 
shall  likewise  be  countersigned  by  the  commissioner  of  loans 
for  that  State  where  the  notes  may  respectively  be  made  paya- 
ble. 

Sec.  4.  That  the  Secretary  of  the  Treasury  be,  and  he  is 
hereby  authorized,  with  the  approbation  of  the  President  of  the 
United  States,  to  cause  to  be  issued  such  portion  of  the  said 
Treasury  notes  as  the  President  may  think  expedient  in  payment 
of  supplies,  or  debts  due  by  the  United  States,  to  such  public 
creditors,  or  other  persons,  as  may  choose  to  receive  such 
notes  in  payment,  as  aforesaid,  at  par :  and  the  Secretary  of 
the  Treasury  is  further  authorized,  with  the  approbation  of 
the  President  of  the  United  States,  to  borrow,  from  time  to 
time,  not  under  par,  such  sums  as  the  President  may  think 
expedient,  on  the  credit  of  such  notes.  And  it  shall  be  a  good 
execution  of  this  provision  to  pay  such  notes  to  such  bank  or 
banks  as  will  receive  the  same  at  par  and  give  credit  to  the 


472  CONTEST  FOR  SOUND  MONEY 

Treasurer  of  the  United  States  for  the  amount  thereof,  on  the 
day  on  which  the  said  notes  shall  thus  be  issued  and  paid  to 
such  bank  or  banks  respectively. 

Sec.  5.  That  the  said  Treasury  notes  shall  be  transferable  by 
delivery  and  assignment  endorsed  thereon  by  the  person  to 
whose  order  the  same  shall,  on  the  face  thereof,  have  been 
made  payable. 

Sec.  6.  That  the  said  Treasury  notes,  whenever  made  paya- 
ble, shall  be  everywhere  received  in  payment  of  all  duties  and 
taxes  laid  by  the  authority  of  the  United  States,  and  of  all  pub- 
lic lands  sold  by  the  said  authority.  On  every  such  payment, 
credit  shall  be  given  for  the  amount  of  both  the  principal  and 
the  interest  which,  on  the  day  of  such  payment,  may  appear 
due  on  the  note  or  notes  thus  given  in  payment.  And  the  said 
interest  shall,  on  such  payments,  be  computed  at  the  rate  of 
one  cent  and  one  half  a  cent  per  day  on  every  hundred  dollars 
of  principal,  and  each  month  shall  be  computed  as  containing 
30  days. 

Sec.  7.  That  any  person  making  payment  to  the  United 
States  in  the  said  Treasury  notes  into  the  hands  of  any  collec- 
tor, receiver  of  public  monies,  or  other  officer  or  agent,  shall, 
on  books  kept  according  to  such  forms  as  shall  be  prescribed  by 
the  Secretary  of  the  Treasury,  give  duplicate  certificates  of  the 
number  and  respective  amount  of  principal  and  interest  of  each 
and  every  Treasury  note  thus  paid  by  such  person  ;  and  every 
collector,  receiver  of  public  monies  or  other  public  officer  or 
agent  who  shall  thus  receive  any  of  the  said  Treasury  notes 
in  payment,  shall,  on  payment  of  the  same  into  the  Treasury, 
or  into  one  of  the  banks  where  the  public  monies  are  or  may 
be  deposited,  receive  credit  both  for  the  principal  and  for  the 
interest,  computed  as  aforesaid,  which,  on  the  day  of  such  last- 
mentioned  payment  shall  appear  due  on  the  note  or  notes  thus 
paid  in.  And  he  shall  be  charged  for  the  interest  accrued  on 
such  note  or  notes  from  the  day  on  which  the  same  shall  have 
been  received  by  him  in  payment  as  aforesaid,  to  the  day  on 
which  the  same  shall  be  paid  by  him  as  aforesaid  :  Provided 
always,  That  no  such  charge  or  deduction  shall  be  made  with 
respect  to  any  bank  into  which  payments  as  aforesaid  may  be 
made  to  the  United  States,  either  by  individuals  or  by  collec- 
tors, receivers  or  other  public  officers  or  agents,  and  which  shall 
receive  the  same  as  specie,  and  give  credit  to  the  Treasurer  of 
the  United  States  for  the  amount  thereof,  including  the  interest 
accrued  and  due  on  such  notes  on  the  day  on  which  the  same 
shall  have  been  thus  paid  into  such  bank  on  account  of  the 
United  States. 


APPENDIX  473 

Sec.  8.  That  the  commissioners  of  the  sinking  fund  be,  and 
they  are  hereby  authorized  and  directed  to  cause  to  be  reim- 
bursed and  paid  the  principal  and  interest  of  the  Treasury  notes 
which  may  be  issued  by  virtue  of  this  act,  at  the  several  time 
and  times  when  the  same,  according  to  the  provisions  of  this 
act,  should  be  thus  reimbursed  and  paid.  And  the  said  com- 
missioners are  further  authorized  to  make  purchases  of  the  said 
notes,  in  the  same  manner  as  of  other  evidences  of  the  public 
debt,  and  at  a  price  not  exceeding  par,  .for  the  amount  of  the 
principal  and  interest  due  at  the  time  of  purchase  on  such 
notes.  So  much  of  the  funds  constituting  the  annual  appropri- 
ation of  $8,000,000,  for  the  principal  and  interest  of  the  public 
debt  of  the  United  States,  as  may  be  wanted  for  that  purpose, 
after  satisfying  the  sums  necessary  for  the  payment  of  the  inter- 
est and  such  part  of  the  principal  of  the  said  debt  as  the  United 
States  ar'  now  pledged  annually  to  pay  and  reimburse,  is  hereby 
pledged  and  appropriated  for  the  payment  of  the  interest,  and 
for  the  reimbursement  or  purchase  of  the  principal  of  the  said 
notes.  And  so  much  of  any  monies  in  the  Treasury  not  other- 
wise appropriated  as  may  be  necessary  for  that  purpose,  is 
hereby  appropriated  for  making  up  any  deficiency  in  the  funds 
thus  pledged  appropriated  for  paying  the  principal  and  interest 
as  aforesaid. 

[Secs.  9  and  10  relate  to  printing  and  the  punishment  for 
counterfeiting.] 

The  Act  of  February  25,  1813  and  the  Act  of  March  4,  18 14, 
authorized  further  issues  of  Treasury  notes  in  terms  practically 
identical  with  the  act  of  181 2. 

The  Act  of  November  15,  18 14  authorized  the  receipt  of 
certain  Treasury  notes  for  loans  to  be  issued  by  the  government. 

The  Act  of  December  26,  18 14  authorized  the  Secretary  of 
the  Treasury,  with  the  approval  of  the  President,  to  issue 
additional  notes. 

Act  of    February  24,    181 5  —  To   authorize   the   issuing    of 
Treasury  notes  for  the  service  of  the  year  18 15 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury,  with 
the  approbation  of  the  President  of  the  United  States,  be,  and 
he  is  hereby  authorized  to  cause  Treasury  notes  for  a  sum  not 
exceeding  $25,000,000,  to  be  prepared,  signed,  and  issued,  at 
the  Treasury  of  the  United  States,  in  the  manner  hereinafter 
provided. 

[Sec.  2  relates  to  manner  of  signing  notes.] 


474  CONTEST  FOR  SOUND  MONEY 

Sec.  3.  That  the  said  Treasury  notes  shall  be  prepared  of 
such  denominations  as  the  Secretary  of  the  Treasury,  with  the 
approbation  of  the  President  of  the  United  States,  shall,  from 
time  to  time,  direct ;  and  such  of  the  said  notes  as  shall  be  of 
a  denomination  less  than  $100,  shall  be  payable  to  bearer  and 
be  transferable  by  delivery  alone,  and  shall  bear  no  interest ; 
and  such  of  the  said  notes  as  shall  be  of  the  denomination  of 
$100,  or  upwards,  may  be  made  payable  to  order,  and  transfera- 
ble by  delivery  and  assignment,  endorsed  on  the  same,  and 
bearing  an  interest  from  the  day  on  which  they  shall  be  issued, 
at  the  rate  of  5§  per  centum  per  annum  ;  or  they  may  be  made 
payable  to  bearer,  and  transferable  by  delivery  alone,  and  bear- 
ing no  interest,  as  the  Secretary  of  the  Treasury,  with  the  ap- 
probation of  the  President  of  the  United  States,  shall  direct. 

Sec.  4.  That  it  shall  be  lawful  for  the  holders  of  the  afore- 
said Treasury  notes  not  bearing  an  interest  and  of  the  Treasury 
notes  bearing  an  interest  at  the  rate  of  5f  per  centum  per 
annum,  to  present  them  at  any  time,  in  sums  not  less  than 
$100,  to  the  Treasury  of  the  United  States,  or  to  any  commis- 
sioner of  loans  ;  and  the  holders  of  the  said  Treasury  notes  not 
bearing  an  interest,  shall  be  entitled  to  receive  therefor,  the 
amount  of  the  said  notes,  in  a  certificate  or  certificates  of 
funded  stock,  bearing  interest  at  7  per  centum  per  annum, 
and  the  holders  of  the  aforesaid  Treasury  notes  bearing  an 
interest  at  the  rate  of  5f  per  centum,  shall  be  entitled  to  receive 
therefor  the  amount  of  the  said  notes  including  the  interest  due 
on  the  same,  in  a  like  certificate  or  certificates  of  funded  stock, 
bearing  an  interest  of  6  per  centum  per  annum,  from  the  first 
day  of  the  calendar  month  next  ensuing  that  in  which  the  said 
notes  shall  thus  be  respectively  presented,  and  payable  quarter- 
yearly,  on  the  same  days  whereon  the  interest  of  the  funded 
debt  is  now  payable.  And  the  stock  thus  to  be  issued  shall  be 
transferable  in  the  same  manner  as  the  other  funded  stock  of 
[the]  United  States ;  the  interest  on  the  same,  and  its  eventual 
reimbursement,  shall  be  effected  out  of  such  fund  as  has  been 
or  shall  be  established  by  law  for  the  payment  and  reimburse- 
ment of  the  funded  public  debt  contracted  since  the  declaration 
of  war  against  Great  Britain.  And  the  faith  of  the  United 
States  is  hereby  pledged  to  establish  sufficient  revenues  and  to 
appropriate  them  as  an  addition  to  the  said  fund,  if  the  same 
shall,  at  any  time  hereafter,  become  inadequate  for  effecting  the 
purpose  aforesaid  :  Provided,  however,  That  it  shall  be  lawful 
for  the  United  States  to  reimburse  the  stock  thus  created,  at 
any  time  after  the  last  day  of  December,  1824. 

Sec.  5.   That  it  shall  be  lawful   for   the   Secretary  of   the 


APPENDIX  475 

Treasury  to  cause  the  Treasury  notes  which,  in  pursuance  of 
the  preceding  section,  shall  be  delivered  up  and  exchanged  for 
funded  stock,  and  also  the  Treasury  notes  which  shall  have  been 
paid  to  the  United  States  for  taxes,  duties,  or  demands,  in  the 
manner  hereinafter  provided,  to  be  re-issued,  and  applied  anew, 
to  the  same  purposes,  and  in  the  same  manner,  as  when  origi- 
nally issued. 

[Secs.  6  to  i  i  are  similar  to  the  previous  provisions.] 

Act  of  April  10,  1816 — To  incorporate  the  subscribers  to  the 
Bank  of  the  United  States 1 

Be  it  enacted,  etc.,  That  a  Bank  of  the  United  States  of 
America  shall  be  established,  with  a  capital  of  $35,000,000, 
divided  into  350,000  shares,  of  $100  each  share.  70,000 
shares,  amounting  to  the  sum  of  $7,000,000,  part  of  the  capital 
of  the  said  Bank,  shall  be  subscribed  and  paid  for  by  the  United 
States,  in  the  manner  hereinafter  specified  ;  and  280,000  shares, 
amounting  to  the  sum  of  $28,000,000,  shall  be  subscribed  and 
paid  for  by  individuals,  companies,  or  corporations,  in  the 
manner  hereinafter  specified. 

[Sec.  2  provides  for  method  of  subscribing  to  shares.] 
[Sec.  3  provides  for  payment  for  the  shares,  one-fourth  in 
specie,  the  remainder  in  specie  or  government  bonds;  in  in- 
stalments 30  per  cent  at  once,  35  per  cent  in  six  months,  35 
per  cent  in  twelve  months.] 

[Sec.  4  provides  regulations  for  transfer  of  bonds.] 
Sec.  5.  That  it  shall  be  lawful  for  the  United  States  to  pay 
and  redeem  the  funded  debt  subscribed  to  the  capital  of  the 
said  bank  at  the  rates  aforesaid,  in  such  sums,  and  at  such 
times,  as  shall  be  deemed  expedient,  any  thing  in  any  act  or 
acts  of  Congress  to  the  contrary  thereof  notwithstanding.  And 
it  shall  also  be  lawful  for  the  president,  directors,  and  com- 
pany, of  the  said  bank,  to  sell  and  transfer  for  gold  and  silver 
coin,  or  bullion,  the  funded  debt  subscribed  to  the  capital  of 
the  said  bank  as  aforesaid  :  Provided  always,  That  they  shall 
not  sell  more  thereof  than  the  sum  of  two  millions  of  dollars 
in  any  one  year ;  nor  sell  any  part  thereof  at  any  time  within 
the  United  States,  without  previously  giving  notice  of  their  in- 
tention to  the  Secretary  of  the  Treasury,  and  offering  the  same 
to  the  United  States  for  the  period  of  fifteen  days,  at  least,  at 
the  current  price,  not  exceeding  the  rates  aforesaid. 

1  The  provisions  of  this  act,  which  merely  repeat  those  of  the  act  of 
1 79 1  {ante),  are  not  reproduced. 


476  CONTEST  FOR  SOUND  MONEY 

Sec.  6.  That  at  the  opening  of  subscription  to  the  capital 
stock  of  the  said  bank,  the  Secretary  of  the  Treasury  shall  sub- 
scribe, or  cause  to  be  subscribed,  on  behalf  of  the  United 
States,  the  said  number  of  70,000  shares,  amounting  to 
$7,000,000  as  aforesaid,  to  be  paid  in  gold  or  silver  coin,  or 
in  stock  of  the  United  States,  bearing  interest  at  the  rate  of  5 
per  centum  per  annum.  .  .  . 

[Sec.  7  limits  the  life  of  the  charter  to  March  3,  1836.] 

Sec.  8.  That  for  the  management  of  the  affairs  of  the  said 
corporation,  there  shall  be  twenty-five  directors,  five  of  whom, 
being  stockholders,  shall  be  annually  appointed  by  the  Presi- 
dent of  the  United  States,  by  and  with  the  advice  and  consent 
of  the  Senate,  not  more  than  three  of  whom  shall  be  residents 
of  any  one  State  ;  and  twenty  of  whom  shall  be  annually 
elected  at  the  banking  house  in  the  city  of  Philadelphia,  on 
the  first  Monday  of  January,  in  each  year,  by  the  qualified 
stockholders  of  the  capital  of  the  said  bank,  other  than  the 
United  States.  .  .  . 

[Sec.  9  provides  for  beginning  business  when  $8,400,000 
has  been  paid  in  on  account  of  subscriptions.] 

[Sec.  10  provides  for  appointment  of  officers  and  em- 
ployees.] 

[Sec.  1 1  contains  the  "  fundamental  articles  "  largely  as  in 
the  act  of  1791,  including  regulation  for  voting  shares,  eligi- 
bility of  directors,  quorum,  general  meetings  of  shareholders, 
dividends,  bonds  of  officers,  real  estate  holdings,  general  busi- 
ness, issue  of  notes,  branches,  examination,  etc.  The  follow- 
ing are  important  variations  from  the  previous  act :] 

Eighth  —  The  total  amount  of  debts  which  the  said  corpora- 
tion shall  at  any  time  owe,  whether  by  bond,  bill,  note,  or  other 
contract,  over  and  above  the  debt  or  debts  due  for  money  de- 
posited in  the  bank,  shall  not  exceed  the  sum  of  $35,000,000, 
unless  the  contracting  of  any  greater  debt  shall  have  been 
previously  authorized  by  law  of  the  United  States. 

********** 

Twelfth —  .  .  .  Provided,  That  all  bills  or  notes,  so  to  be 
issued  by  said  corporation,  shall  be  made  payable  on  demand, 
other  than  bills  or  notes  for  the  payment  of  a  sum  not  less  than 
$100  each,  and  payable  to  the  order  of  some  person  or  persons, 
which  bills  or  notes  it  shall  be  lawful  for  said  corporation  to  make 
payable  at  any  time  not  exceeding  60  days  from  the  date  thereof. 

********** 
Seventeenth  —  No  note  shall  be  issued  of  less  amount  than 
$5- 


APPENDIX  477 

[Secs.  12  and  13  fix  penalties  for  violation  of  the  provisions 
of  the  act.] 

Sec.  14.  That  the  bills  or  notes  of  the  said  corporation 
originally  made  payable,  or  which  shall  have  become  payable  on 
demand,  shall  be  receivable  in  all  payments  to  the  United  States, 
unless  otherwise  directed  by  act  of  Congress. 

Sec.  15.  That  during  the  continuance  of  this  act,  and  when- 
ever required  by  the  Secretary  of  the  Treasury,  the  said  corpo- 
ration shall  give  the  necessary  facilities  for  transferring  the 
public  funds  from  place  to  place,  within  the  United  States,  or 
the  territories  thereof,  and  for  distributing  the  same  in  payment 
of  the  public  creditors,  without  charging  commissions  or  claim- 
ing allowance  on  account  of  difference  of  exchange,  and  shall 
also  do  and  perform  the  several  and  respective  duties  of  the 
commissioners  of  loans  for  the  several  states,  or  of  any  one  or 
more  of  them,  whenever  required  by  law. 

Sec.  16.  That  the  deposits  of  the  money  of  the  United 
States,  in  places  in  which  the  said  bank  and  branches  thereof 
may  be  established,  shall  be  made  in  said  bank  or  branches 
thereof,  unless  the  Secretary  of  the  Treasury  shall  at  any  time 
otherwise  order  and  direct ;  in  which  case  the  Secretary  of  the 
Treasury  shall  immediately  lay  before  Congress,  if  in  session, 
and  if  not,  immediately  after  the  commencement  of  the  next 
session,  the  reasons  of  such  order  or  direction. 

Sec.  17.  That  the  said  corporation  shall  not  at  any  time  sus- 
pend or  refuse  payment  in  gold  and  silver,  of  any  of  its  notes, 
bills  or  obligations ;  nor  of  any  moneys  received  upon  deposit 
in  said  bank,  or  in  any  of  its  offices  of  discount  and  deposit. 
And  if  the  said  corporation  shall  at  any  time  refuse  or  neglect 
to  pay  on  demand  any  bill,  note  or  obligation  issued  by  the 
corporation,  according  to  the  contract,  promise  or  undertaking 
therein  expressed  ;  or  shall  neglect  or  refuse  to  pay  on  demand 
any  moneys  received  in  said  bank,  or  in  any  of  its  offices  afore- 
said, on  deposit,  to  the  person  or  persons  entitled  to  receive  the 
same,  then,  and  in  every  such  case,  the  holder  of  any  such  note, 
bill  or  obligation,  or  the  person  or  persons  entitled  to  demand 
and  receive  such  moneys,  as  aforesaid,  shall  respectively  be 
entitled  to  receive  and  recover  interest  on  the  said  bills,  notes, 
obligations  or  moneys,  until  the  same  shall  be  fully  paid  and 
satisfied,  at  the  rate  of  twelve  per  centum  per  annum  from  the 
time  of  such  demand  as  aforesaid  ;  Provided,  That  Congress 
may  at  any  time  hereafter  enact  laws  enforcing  and  regulating 

1  This  section  was  repealed  by  the  Act  of  June  15,  1836,  after  the  ex- 
piration of  this  charter. 


478  CONTEST  FOR  SOUND  MONEY 

the  recovery  of  the  amount  of  the  notes,  bills,  obligations  or 
other  debts,  of  which  payment  shall  have  been  refused  as  afore- 
said, with  the  rate  of  interest  above  mentioned,  vesting  jurisdic- 
tion for  that  purpose  in  any  courts,  either  of  law  or  equity, 
of  the  courts  of  the  United  States,  or  Territories  thereof,  or 
of  the  several  States,  as  they  may  deem  expedient. 

[Secs.  18  and  19  provide  penalties  of  imprisonment  and  fine 
for  forging  or  counterfeiting  the  notes  or  bills  of  the  Bank  of  the 
United  States,  or  any  order  or  check  on  the  bank  or  its  cashier.] 

Sec.  20.  That  in  consideration  of  the  exclusive  privileges 
and  benefits  conferred  by  this  act,  upon  the  said  bank,  the 
president,  directors,  and  company  thereof,  shall  pay  to  the 
United  States,  out  of  the  corporate  funds  thereof,  the  sum  of 
#1,500,000,  in  three  equal  payments  ;  that  is  to  say  :  $500,000 
at  the  expiration  of  two  years ;  $500,000  at  the  expiration 
of  three  years ;  and  $500,000  at  the  expiration  of  four  years 
after  the  said  bank  shall  be  organized,  and  commence  its  opera- 
tions in  the  manner  hereinbefore  provided. 

Sec.  ai.  That  no  other  bank  shall  be  established  by  any 
future  law  of  the  United  States  during  the  continuance  of  the 
corporation  hereby  created,  for  which  the  faith  of  the  United 
States  is  hereby  pledged.  .  .  . 

[Sec.  22  limits  the  time  within  which  the  bank  must  begin 
business.] 

Sec.  23.  And  be  it  further  enacted,  That  it  shall,  at  all  times, 
be  lawful,  for  a  committee  of  either  house  of  Congress,  ap- 
pointed for  that  purpose,  to  inspect  the  books,  and  to  examine 
into  the  proceedings  of  the  corporation  hereby  created,  and  to 
report  whether  the  provisions  of  this  charter  have  been,  by  the 
same,  violated  or  not ;  and  whenever  any  committee,  as  afore- 
said, shall  find  and  report,  or  the  President  of  the  United 
States  shall  have  reason  to  believe  that  the  charter  has  been 
violated,  it  may  be  lawful  for  Congress  to  direct,  or  the  Presi- 
dent to  order  a  scire  facias  to  be  sued  out  of  the  circuit  court 
of  the  district  of  Pennsylvania,  in  the  name  of  the  United 
States,  (which  shall  be  executed  upon  the  president  of  the  cor- 
poration for  the  time  being,  at  least  fifteen  days  before  the 
commencement  of  the  term  of  said  court,)  calling  on  the  said 
corporation  to  show  cause  wherefore  the  charter  hereby 
granted,  shall  not  be  declared  forfeited  ;  and  it  shall  be  lawful 
for  the  said  court,  upon  the  return  of  the  said  scire  facias,  to 
examine  into  the  accounts  of  the  truth  of  the  alleged  viola- 
tion, and  if  such  violation  be  made  appear,  then  to  pronounce 
and  adjudge  that  the  said  charter  is  forfeited  and  annulled. 
Provided,  however,  Every  issue  of  fact  which  may  be  joined 


APPENDIX  479 

between  the  United  States  and  the  corporation  aforesaid,  shall 
be  tried  by  a  jury.  And  it  shall  be  lawful  for  the  court  afore- 
said to  require  the  production  of  such  of  the  books  of  the 
corporation  as  it  may  deem  necessary  for  the  ascertainment  of 
the  controverted  facts  :  and  the  final  judgment  of  the  court 
aforesaid,  shall  be  examinable  in  the  Supreme  Court  of  the 
United  States,  by  writ  of  error,  and  may  be  there  reversed  or 
affirmed,  according  to  the  usages  of  law. 

Act  of  March  3,  181 7  —  Repealed  all  authority  to  issue  or 
reissue  Treasury  notes,  and  directed  cancellation  of  all  notes 
received  or  funded. 


Act  of  June   28,    1834 — Concerning  the  gold  coins   of  the 
United  States 

Be  it  enacted,  etc.,  That  the  gold  coins  of  the  United  States 
shall  contain  the  following  quantities  of  metal,  that  is  to  say : 
each  eagle  shall  contain  232  grains  of  pure  gold,  and  258 
grains  of  standard  gold;  each  half  eagle  116  grains  of  pure 
gold,  and  129  grains  of  standard  gold;  each  quarter  eagle 
shall  contain  58  grains  of  pure  gold,  and  64^  grains  of  standard 
gold  ;  every  such  eagle  shall  be  of  the  value  of  $10 ;  every  such 
half  eagle  shall  be  of  the  value  of  $5  ;  and  every  such  quarter 
eagle  shall  be  of  the  value  of  $  2\  ;  and  the  said  gold  coins 
shall  be  receivable  in  all  payments,  when  of  full  weight,  ac- 
cording to  their  respective  values ;  and  when  of  less  than  full 
weight,  at  less  values,  proportioned  to  their  respective  actual 
weights. 

Sec.  2.  That  all  standard  gold  or  silver  deposited  for  coinage 
after  the  thirty-first  of  July  next,  shall  be  paid  for  in  coin  under 
the  direction  of  the  Secretary  of  the  Treasury,  within  five  days 
from  the  making  of  such  deposit,  deducting  from  the  amount 
of  said  deposit  of  gold  and  silver  one-half  of  one  per  centum  : 
Provided,  That  no  deduction  shall  be  made  unless  said  advance 
be  required  by  such  depositor  within  forty  days. 

Sec.  3.  That  all  gold  coins  of  the  United  States  minted 
anterior  to  the  thirty-first  day  of  July  next,  shall  be  receivable 
in  all  payments  at  the  rate  of  94^  cents  per  pennyweight. 

[Sec.  4  directs  the  setting  apart  of  gold  coins  for  assay  and 
makes  provision  for  securing  accuracy  in  fineness  and  weight.] 

Sec.  5.  That  this  act  shall  be  in  force  from  and  after  the 
31st  of  July,  1834. 


480  CONTEST  FOR  SOUND  MONEY 

Act  of  June  23,  1836 — To  regulate  the  deposites  of  the  public 
money.     {Repealed  1 84 1 ) 

Be  it  enacted,  etc.,  That  it  shall  be  the  duty  of  the  Secretary 
of  the  Treasury  to  select  as  soon  as  may  be  practicable  and 
employ  as  the  depositories  of  the  money  of  the  United  States, 
such  of  the  banks  incorporated  by  the  several  States,  by  Con- 
gress for  the  District  of  Columbia,  or  by  the  Legislative  Coun- 
cils of  the  respective  Territories  for  those  Territories,  as  may 
be  located  at,  adjacent  or  convenient  to  the  points  or  places  at 
which  the  revenues  may  be  collected,  or  disbursed,  and  in 
those  States,  Territories  or  Districts  in  which  there  are  no 
banks,  or  in  which  no  bank  can  be  employed  as  a  deposite 
bank,  and  within  which  the  public  collections  or  disbursements 
require  a  depository,  the  said  Secretary  may  make  arrange- 
ments with  a  bank  or  banks,  in  some  other  State,  Territory  or 
District,  to  establish  an  agency  or  agencies,  in  the  States,  Ter- 
ritories or  Districts  so  destitute  of  banks,  as  banks  of  deposite  ; 
and  to  receive  through  such  agencies  such  deposites  of  the 
public  money,  as  may  be  directed  to  be  made  at  the  points 
designated,  and  to  make  such  disbursements  as  the  public  ser- 
vice may  require  at  those  points ;  the  duties  and  liabilities  of 
every  bank  thus  establishing  any  such  agency  to  be  the  same  in 
respect  to  its  agency  as  are  the  duties  and  liabilities  of  deposite 
banks  generally  under  the  provisions  of  this  act :  Provided, 
That  at  least  one  such  bank  shall  be  selected  in  each  State 
and  Territory,  if  any  can  be  found  in  each  State  and  Ter- 
ritory willing  to  be  employed  as  depositories  of  the  public 
money,  upon  the  terms  and  conditions  hereinafter  prescribed, 
and  continue  to  conform  thereto ;  and  that  the  Secretary  of 
the  Treasury  shall  not  suffer  to  remain  in  any  deposite  bank, 
an  amount  of  the  public  money  more  than  equal  to  three-fourths 
of  the  amount  of  its  capital  stock  actually  paid  in,  for  a  longer 
time  than  may  be  necessary  to  enable  him  to  make  the  trans- 
fers required  by  the  twelfth  section  of  this  act ;  and  that  the 
banks  so  selected,  shall  be,  in  his  opinion,  safe  depositories  of 
the  public  money,  and  shall  be  willing  to  undertake  to  do  and 
perform  the  several  duties  and  services,  and  to  conform  to  the 
several  conditions  prescribed  by  this  act. 

Sec.  2.  That  if,  at  any  point  or  place  at  which  the  public 
revenue  may  be  collected,  there  shall  be  no  bank  located, 
which,  in  the  opinion  of  the  Secretary  of  the  Treasury,  is  in  a 
safe  condition,  or  where  all  the  banks  at  such  point  or  place 
shall  fail  or  refuse  to  be  employed  as  depositories  of  the  public 
money  of  the  United  States,  or  to  comply  with  the  conditions 


APPENDIX  481 

prescribed  by  this  act,  or  where  such  banks  shall  not  have  suf- 
ficient capital  to  become  depositories  of  the  whole  amount  of 
moneys  collected  at  such  point  or  place,  he  shall  and  may 
order  and  direct  the  public  money  collected  at  such  point  or 
place  to  be  deposited  in  a  bank  or  banks  in  the  same  State,  or 
in  some  one  or  more  of  the  adjacent  States  upon  the  terms  and 
conditions  hereinafter  prescribed  :  Provided,  That  nothing  in 
this  act  contained  shall  be  so  construed  as  to  prevent  Congress 
at  any  time  from  passing  any  law  for  the  removal  of  the  public 
money  from  any  of  the  said  banks,  or  from  changing  the  terms 
of  the  deposite,  or  to  prevent  the  said  banks  at  any  time  from 
declining  any  longer  to  be  the  depositories  of  the  public  money 
upon  paying  over,  or  tendering  to  pay,  the  whole  amount  of 
public  moneys  on  hand,  according  to  the  terms  of  its  agree- 
ment with  the  said  Secretary. 

Sec.  3.  That  no  bank  shall  hereafter  be  selected  and  em- 
ployed by  the  Secretary  of  the  Treasury  as  a  depository  of  the 
public  money,  until  such  bank  shall  have  first  furnished  to  the 
said  Secretary  a  statement  of  its  condition  and  business,  a  list 
of  its  directors,  the  current  price  of  its  stock ;  and  also  a  copy 
of  its  charter ;  and  likewise,  such  other  information  as  may  be 
necessary  to  enable  him  to  judge  of  the  safety  of  its  condition. 

Sec.  4.  That  the  said  banks,  before  they  shall  be  employed 
as  the  depositories  of  the  public  money,  shall  agree  to  receive 
the  same,  upon  the  following  terms  and  conditions,  to  wit : 
First.  Each  bank  shall  furnish  to  the  Secretary  of  the  Treasury, 
from  time  to  time,  as  often  as  he  may  require,  not  exceeding 
once  a  week,  statements  setting  forth  its  condition  and  busi- 
ness, as  prescribed  in  the  foregoing  section  of  this  act,  except 
that  such  statements  need  not,  unless  requested  by  said  Secre- 
tary, contain  a  list  of  the  directors,  or  a  copy  of  the  charter. 
And  the  said  bank  shall  furnish  to  the  Secretary  of  the  Treasury, 
and  to  the  Treasurer  of  the  United  States,  a  weekly  statement 
of  the  condition  of  his  account  from  their  books.  And  the 
Secretary  of  the  Treasury  shall  have  the  right,  by  himself,  or 
an  agent  appointed  for  that  purpose,  to  inspect  such  general 
accounts  in  the  books  of  the  bank,  as  shall  relate  to  the  said 
statements  :  Provided,  That  this  shall  not  be  construed  to  imply 
a  right  of  inspecting  the  account  of  any  private  individual  or 
individuals  with  the  bank. 

Secondly.  To  credit  as  specie,  all  sums  deposited  therein  to 
the  credit  of  the  Treasurer  of  the  United  States,  and  to  pay  all 
checks,  warrants,  or  drafts,  drawn  on  such  deposites  in  specie  if 
required  by  the  holder  thereof. 

Thirdly.    To  give,  whenever  required  by  the  Secretary  of  the 


482  CONTEST  FOR  SOUND  MONEY 

Treasury,  the  necessary  facilities  for  transferring  the  public 
funds  from  place  to  place,  within  the  United  States,  and  the 
Territories  thereof,  and  for  distributing  the  same  in  payments 
of  the  public  creditors,  without  charging  commission  or  claim- 
ing allowance  on  account  of  difference  of  exchange. 

Fourthly.  To  render  to  the  Government  of  the  United  States 
all  the  duties  and  services  heretofore  required  by  law  to  be 
performed  by  the  late  Bank  of  the  United  States  and  its  several 
branches  or  offices. 

Sec.  5.  That  no  bank  shall  be  selected  or  continued  as  a 
place  of  deposite  of  the  public  money  which  shall  not  redeem 
its  notes  and  bills  on  demand  in  specie ;  nor  shall  any  bank  be 
selected  or  continued  as  aforesaid,  which  shall  after  the  fourth 
of  July,  in  the  year  1836,  issue  or  pay  out  any  note  or  bill  of  a 
less  denomination  than  $5  ;  nor  shall  the  notes  or  bills  of  any 
bank  be  received  in  payment  of  any  debt  due  to  the  United 
States  which  shall,  after  the  said  fourth  day  of  July,  in  the  year 
1836,  issue  any  note  or  bill  of  a  less  denomination  than  $5. 

Sec.  6.  That  the  Secretary  of  the  Treasury  shall  be,  and  he 
is  hereby  authorized,  and  it  shall  be  his  duty,  whenever  in  his 
judgment  the  same  shall  be  necessary  or  proper,  to  require  of 
any  bank  so  selected  and  employed  as  aforesaid,  collateral  or 
additional  securities  for  the  safe  keeping  of  the  public  moneys 
deposited  therein,  and  the  faithful  performance  of  the  duties 
required  by  this  act. 

Sec.  7.  That  it  shall  be  lawful  for  the  Secretary  of  the  Treas- 
ury to  enter  into  contracts  in  the  name  and  for  and  on  behalf 
of  the  United  States,  with  the  said  banks  so  selected  or  em- 
ployed, whereby  the  said  banks  shall  stipulate  to  do  and  per- 
form the  several  duties  and  services  prescribed  by  this  act. 

Sec.  8.  That  no  bank  which  shall  be  selected  or  employed 
as  the  place  of  deposite  of  the  public  money  shall  be  discon- 
tinued as  such  depository,  or  the  public  money  withdrawn 
therefrom  except  for  the  causes  hereinafter  mentioned,  that  is 
to  say  :  if  at  any  time,  any  one  of  said  banks  shall  fail  or  refuse 
to  perform  any  of  said  duties  as  prescribed  by  this  act,  and 
stipulated  to  be  performed  by  its  contract ;  or,  if  any  of  said 
banks  shall  at  any  time  refuse  to  pay  its  own  notes  in  specie  if 
demanded  ;  or  shall  fail  to  keep  in  its  vaults  such  an  amount  of 
specie  as  shall  be  required  by  the  Secretary  of  the  Treasury,  and 
shall  be,  in  his  opinion,  necessary  to  render  the  said  bank  a  safe 
depository  of  the  public  moneys,  having  due  regard  to  the 
nature  of  this  business  transacted  by  the  bank ;  in  any  and 
every  such  case  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury  to  discontinue  any  such  bank  as  a  depository,  and 


APPENDIX  483 

withdraw  from  it  the  public  moneys  which  it  may  hold  on  de- 
posite  at  the  time  of  such  discontinuance.  And  in  case  of  the 
discontinuance  of  any  of  said  banks  it  shall  be  the  duty  of  the 
Secretary  of  the  Treasury  to  report  to  Congress  immediately  if 
in  session,  and  if  not  in  session,  then  at  the  commencement  of 
its  next  session,  the  facts  and  reasons  which  have  induced  such 
discontinuance.  And  in  case  of  the  discontinuance  of  any  of 
said  banks  as  a  place  of  deposite  of  the  public  money  for  any 
of  the  causes  hereinbefore  provided,  it  shall  be  lawful  for  the 
Secretary  of  the  Treasury  to  deposite  the  money  thus  withdrawn 
in  some  other  banks  of  deposite  already  selected,  or  to  select 
some  other  bank  as  a  place  of  deposite,  upon  the  terms  and 
conditions  prescribed  by  this  act.  And  in  default  of  any  bank 
to  receive  such  deposite,  the  money  thus  withdrawn  shall  be 
kept  by  the  Treasurer  of  the  United  States,  according  to  the 
laws  now  in  force ;  and  shall  be  subject  to  be  disbursed  accord- 
ing to  law. 

Sec.  9.  That  until  the  Secretary  of  the  Treasury  shall  have 
selected  and  employed  the  said  banks  as  places  of  deposite  of 
the  public  money,  in  conformity  to  the  provisions  of  this  act, 
the  several  State  and  District  banks  at  present  employed  as 
depositories  of  the  money  of  the  United  States,  shall  continue 
to  be  the  depositories  aforesaid  upon  the  terms  and  conditions 
upon  which  they  have  been  so  employed. 

Sec.  10.  That  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury  to  lay  before  Congress  at  the  commencement  of  each 
annual  session,  a  statement  of  the  number  and  names  of  the 
banks  employed  as  depositories  of  the  public  money,  and  of 
their  condition,  and  the  amount  of  public  money  deposited  in 
each,  as  shown  by  their  returns  at  the  Treasury :  and  if  the 
selection  of  any  bank  as  a  depository  of  the  public  money  be 
made  by  the  Secretary  of  the  Treasury,  while  Congress  is  in 
session,  he  shall  immediately  report  the  name  and  condition  of 
such  bank  to  Congress  :  and  if  any  such  selection  shall  be  made 
during  the  recess  of  Congress,  he  shall  report  the  same  to  Con- 
gress during  the  first  week  of  its  next  session. 

Sec.  11.  That  whenever  the  amount  of  public  deposites  to 
the  credit  of  the  Treasurer  of  the  United  States,  in  any  bank 
shall,  for  a  whole  quarter  of  a  year,  exceed  the  one-fourth  part 
of  the  amount  of  the  capital  stock  of  such  bank  actually  paid 
in,  the  banks  shall  allow  and  pay  to  the  United  States  for  the 
use  of  the  excess  of  the  deposites  over  the  one-fourth  part  of  its 
capital,  an  interest  at  the  rate  of  two  per  centum  per  annum, 
to  be  calculated  for  each  quarter,  upon  the  average  excesses  of 
the  quarter :  and  it  shall  be  the  duty  of  the  Secretary  of  the 


484  CONTEST  FOR  SOUND  MONEY 

Treasury  at  the  close  of  each  quarter,  to  cause  the  amounts  on 
deposite  in  each  deposite  bank  for  the  quarter,  to  be  examined 
and  ascertained,  and  to  see  that  all  sums  of  interest  accruing 
under  the  .provisions  of  this  section,  are,  by  the  banks  respec- 
tively passed  to  the  credit  of  the  Treasurer  of  the  United 
States  in  his  accounts  with  the  respective  banks. 

Sec.  12.  That  all  warrants  or  orders  for  the  purpose  of 
transferring  the  public  funds  from  the  banks  in  which  they  now 
are,  or  may  hereafter  be  deposited,  to  other  banks,  whether  of 
deposite  or  not,  for  the  purpose  of  accommodating  the  banks 
to  which  the  transfer  may  be  made,  or  sustain  their  credit,  or 
for  any  other  purpose  whatever,  except  it  be  to  facilitate  the 
public  disbursements  and  to  comply  with  the  provision  of  this 
act,  be,  and  the  same  are  hereby,  prohibited  and  declared  to 
be  illegal ;  and  in.  cases  where  transfers  shall  be  required  for 
purposes  of  equalization  under  the  provisions  of  this  act,  in 
consequence  of  too  great  an  accumulation  of  deposites  in  any 
bank,  such  transfers,  shall  be  made  to  the  nearest  deposite 
banks  which  are  considered  safe  and  secure,  and  which  can  re- 
ceive the  moneys  to  be  transferred  under  the  limitations  in  this 
act  imposed  :  Provided,  That  it  may  be  lawful  for  the  Presi- 
dent of  the  United  States  to  direct  transfers  of  public  money 
to  be  made  from  time  to  time  to  the  mint  and  branch  mints  of 
the  United  States,  for  supplying  metal  for  coining. 

Sec.  13.  That  the  money  which  shall  be  in  the  Treasury  of 
the  United  States  on  the  first  day  of  January,  1837,  reserving 
the  sum  of  $5,000,000,  shall  be  deposited  with  such  of  the  sev- 
eral States,  in  proportion  to  their  respective  representation  in 
the  Senate  and  House  of  Representatives  of  the  United  States, 
as  shall,  by  law,  authorize  their  Treasurers,  or  other  competent 
authorities  to  receive  the  same  on  the  terms  hereinafter  speci- 
fied ;  and  the  Secretary  of  the  Treasury  shall  deliver  the  same 
to  such  Treasurers,  or  other  competent  authorities,  on  receiving 
certificates  of  deposite  therefor,  signed  by  such  competent 
authorities,  in  such  form  as  may  be  prescribed  by  the  Secretary 
aforesaid  ;  which  certificates  shall  express  the  usual  and  legal 
obligations,  and  pledge  the  faith  of  the  State,  for  the  safe  keep- 
ing and  repayment  thereof,  and  shall  pledge  the  faith  of  the 
States  receiving  the  same,  to  pay  the  said  moneys  and  every 
part  thereof,  from  time  to  time,  whenever  the  same  shall  be 
required  by  the  Secretary  of  the  Treasury,  for  the  purpose  of 
defraying  any  wants  of  the  public  treasury,  beyond  the  amount 
of  the  five  millions  aforesaid  :  Provided,  That  if  any  State 
declines  to  receive  its  proportion  of  the  surplus  aforesaid,  on 
the  terms  before  named,  the  same  shall  be  deposited  with  the 


APPENDIX  485 

other  States,  agreeing  to  accept  the  same  on  deposite  in  the 
proportion  aforesaid  :  and  provided  further,  That  when  said 
money,  or  any  part  thereof,  shall  be  wanted  by  the  said  Secre- 
tary, to  meet  appropriations  by  law,  the  same  shall  be  called 
for,  in  ratable  proportions,  within  one  year,  as  nearly  as  con- 
veniently may  be,  from  the  different  States,  with  which  the 
same  is  deposited,  and  shall  not  be  called  for,  in  sums  exceed- 
ing $10,000,  from  any  one  State,  in  any  one  month,  without 
previous  notice  of  30  days,  for  every  additional  sum  of  $20,000, 
which  may  at  any  time  be  required. 

Sec.  14.  That  the  said  deposites  shall  be  made  with  the  said 
States  in  the  following  proportions,  and  at  the  following  times, 
to  wit :  one  quarter  part  on  the  first  day  of  January,  1837,  or 
as  soon  thereafter  as  may  be  ;  one  quarter  part  on  the  first  day 
of  April,  one  quarter  part  on  the  first  day  of  July  and  one 
quarter  part  on  the  first  day  of  October,  all  in  the  same  year. 

[Sec.  1 5  provides  for  additional  clerks,  etc.] 

The  Act  of  June  23,  1836,  authorized  the  Secretary  of  the 
Treasury  to  act  as  the  agent  of  the  United  States  in  all  matters 
relating  to  their  stock  in  the  Bank  of  the  United  States. 

A  Joint  Resolution  of  March  3,  1837,  authorized  the  Secre- 
tary to  receive  from  the  Bank  of  the  United  States,  under  the 
Pennsylvania  charter,  payment  for  the  stock  of  the  United 
States  in  the  late  Bank  of  the  United  States. 

The  Act  of  July  7,  1838,  was  passed  "  to  prevent  the  issue 
and  circulation  of  the  bills,  notes,  and  other  securities  of  cor- 
porations created  by  acts  of  Congress  which  have  expired," 
directed  against  the  late  Bank  of  the  United  States. 


Act  of  January  18,  1837  —  Supplementary  to  the  act  entitled 
"  An  act  establishing  a  mint,  etc." 

[Secs.  1-7,  inclusive,  relate  to  the  organization  of  the  mint, 
duties  of  officers,  bonds,  salaries,  etc.] 

Sec.  8.  That  the  standard  for  both  gold  and  silver  coins  of 
the  United  States  shall  hereafter  be  such,  that  of  1000  parts  by 
weight,  900  shall  be  of  pure  metal  and  100  of  alloy;  and  the 
alloy  of  the  silver  coins  shall  be  of  copper ;  and  the  alloy  of 
the  gold  coins  shall  be  of  copper  and  silver,  provided  that  the 
silver  do  not  exceed  one-half  of  the  whole  alloy. 

Sec.  9.  That  of  the  silver  coins,  the  dollar  shall  be  of  the 
weight  of  412^  grains  ;  the  half  dollar  of  the  weight  of  206^ 
grains;  the  quarter  dollar  of  the  weight  of  103^  grains;  the 


486  CONTEST  FOR  SOUND  MONEY 

dime,  or  tenth  part  of  a  dollar,  of  the  weight  of  41^  grains; 
and  the  half  dime,  or  a  twentieth  part  of  a  dollar,  of  the  weight 
of  2o|  grains.  And  that  dollars,  half  dollars,  and  quarter 
dollars,  dimes  and  half  dimes,  shall  be  legal  tenders  of  pay- 
ment, according  to  their  nominal  value,  for  any  sums  what- 
ever. 

Sec.  10.  That  of  the  gold  coins,  the  weight  of  the  eagle 
shall  be  258  grains;  that  of  the  half  eagle  129  grains;  and 
that  of  the  quarter  eagle  64^  grains.  And  that  for  all  sums 
whatever,  the  eagle  shall  be  a  legal  tender  of  payment  for  10 
dollars  ;  the  half  eagle  for  5  dollars  ;  and  the  quarter  eagle  for 
2\  dollars. 

Sec.  1 1 .   That  the  silver  coins  heretofore  issued  at  the  mint 
of  the  United  States,  and  the  gold  coins  issued  since  the  31st 
day  of  July,  1834,  shall  continue  to  be  legal  tenders  of  pay- 
ment for  their  nominal  values,  on  the  same  terms  as  if  they  were 
of  the  coinage  provided  for  by  this  act. 
[Sec.  12  relates  to  copper  coins.] 
[Sec.  13  provides  for  the  devices  upon  coins.] 
[Secs.  14-24  relate  to  the  deposit  of  bullion  and  payment 
therefor.     No  charge  for  coinage  is  made,  except  for  expense 
of  reducing  bullion  to  standard.] 

[Sec.  25  relates  to  deviations  in  weights  of  coins.] 
[Secs.  26-38  cover  the  technique  of  coinage,  organization  of 
the  mint,  test  of  coins,  delivery  of  coin  in  return  for  bullion, 
minor  coins,  etc.] 

Treasury  Notes  were  authorized  by  the  Act  of  October  12, 
1837,  substantially  in  the  same  form  as  acts  cited  ante ;  the 
Act  of  May  21,  1838,  authorized  reissues  of  such  notes. 

Additional  issues  under  the  provisions  of  the  same  act  were 
authorized  by  the  — 

Act  of  March  2,  1839. 
Act  of  March  31,  1840. 
Act  of  February  15,  1841. 
Act  of  January  31,  1842. 
Act  of  August  31,  1 84  2 . 
Act  of  March  3,  1843. 
Act  of  July  22,  1846. 
The  Act  of  January  28,  1847,  authorized  an  issue  of  notes 
without  reference  to  the  act  of  1837,  but  its  terms  were  practi- 
cally identical. 

The  Act  of  July  5,  1838,  modified  the  act  June  23,  1836, 
so  as  to  relieve  banks  which  issued  notes  under  $5  from  its 
operation  up  to  October  1,  1838. 


APPENDIX  487 

Act  of  July  7,  1838  —  To  restrain  the  circulation  of  small  notes, 
as  a  currency,  in  the  District  of  Columbia,  and  for  other 
purposes 

Be  it  enacted,  etc.,  That,  after  the  tenth  day  of  April  next,  it 
shall  be  unlawful  for  any  individual,  company,  or  corporation, 
to  issue,  pass,  or  offer  to  pass,  within  the  District  of  Columbia, 
any  note,  check,  draft,  bank-bill,  or  any  other  paper  currency, 
of  a  less  denomination  than  $5,  and  if  any  person  or  corpora- 
tion shall  violate  the  provisions  of  this  section,  the  persons 
so  offending,  or,  in  case  of  any  corporation  so  offending,  the 
officers  of  any  such  corporation  for  the  time  being,  shall  be 
liable  to  indictment  by  the  grand  jury  of  the  county  within  the 
district  where  the  offence  shall  have  been  committed  ;  and 
the  persons  so  offending,  or  the  officers  of  the  corporation 
so  offending,  shall,  on  conviction  thereof,  be  fined  in  a  sum 
not  exceeding  $50,  at  the  discretion  of  the  court,  for  every 
offence  ;  one-half  of  said  fine  shall  be  paid  to  the  prosecutor, 
the  other  half  shall  be  for  the  use  of  the  county  where  the 
offence  shall  have  been  committed  ;  Provided,  That  should  the 
prosecutor  offer  himself,  or  be  admitted,  as  a  witness  for 
the  prosecution,  he  shall  forfeit  all  claim  to  any  part  of 
the  penalty,  and  the  whole  shall  go  to  the  county,  and  the 
court  shall  give  judgment  accordingly  ;  and  the  person  so 
offending,  and  the  officers  of  any  corporation,  shall  also  be 
liable  to  pay  the  amount  of  any  note,  bill,  check,  draft,  or  other 
paper,  constituting  part  of  such  currency,  to  any  holder  thereof, 
with  all  costs  incident  to  the  protest  and  legal  collection 
thereof,  with  50  per  cent,  damages  for  non-payment  on 
demand,  to  be  recovered  by  action  of  debt  ;  and  in  case  of 
judgment  for  the  plaintiff,  execution  thereon  shall  be  had  forth- 
with ;  and  it  shall  be  the  duty  of  the  district  attorney  of  the 
District  of  Columbia  to  commence  prosecutions  against  all 
persons  and  every  corporation  offending  against  this  section, 
of  which  he  shall  have  knowledge  or  probable  information ; 
and,  in  case  of  corporations,  the  prosecution  shall  be  against 
the  president  or  any  director  or  cashier  thereof,  for  the  time 
being  ;  and  it  shall  be  the  duty  of  the  grand  jurors  to  present 
all  such  offences  of  which  they  shall  have  knowledge  or  probable 
information  ;  and,  that  no  member  of  the  grand  jury  shall  be 
ignorant  of  his  duty  in  this  particular,  it  shall  be  the  duty  of  the 
court  having  cognizance  of  all  offences  against  this  section  to 
give  the  same  in  charge  to  the  grand  juries  at  the  commence- 
ment of  the  term  after  the  passage  of  this  act. 

Sec.  2.   That  from  and  after  the  passage  of  this  act,  it  shall 


488  CONTEST  FOR  SOUND  MONEY 

be  unlawful  for  any  individual,  company,  or  corporation,  to 
issue,  de  novo,  or  knowingly  to  pass,  or  procure  to  be  issued, 
passed  or  circulated,  within  the  District  aforesaid,  any  note, 
check,  bank-bill,  or  other  paper  medium,  of  the  denomination 
aforesaid,  evidently  intended  for  common  circulation  as  for  and 
in  lieu  of  small  change  in  gold  or  silver,  or  for  any  other  pre- 
tense whatever,  and  which  shall  be  issued  and  circulated  for 
the  first  time  after  the  period  above  limited  in  this  section, 
under  the  penalties  provided  in  the  foregoing  section. 

Note.  — This  act  related  only  to  the  District  of  Columbia  because  it 
was  then  the  opinion  that  Congress  had  jurisdiction  over  this  question 
only  in  the  District  (and  the  Territories)  but  not  in  the  States. 

The  Ad  of  December  27,  1854,  supplemented  this  by  making  the  penal- 
ties much  more  severe,  even  voiding  contracts  payable  in  notes  under  #5. 


Act  of  August  6,  1846  —  To  provide  for  the  better  organization 
of  the  Treasury,  and  for  the  collection,  safe-keeping,  trans- 
fer, and  disbursement  of  the  public  revenue x 

Whereas,  by  the  fourth  section  of  the  act  entitled  "  An  act 
to  establish  the  Treasury  Department,"  approved  September  2, 
1 789,  it  was  provided  that  it  should  be  the  duty  of  the  Treas- 
urer to  receive  and  keep  the  moneys  of  the  United  States,  and 
to  disburse  the  same  upon  warrants  drawn  by  the  Secretary  of 
the  Treasury,  countersigned  by  the  Comptroller,  and  recorded 
by  the  Register,  and  not  otherwise  ;  and  whereas  it  is  found 
necessary  to  make  further  provisions  to  enable  the  Treasurer 
the  better  to  carry  into  effect  the  intent  of  the  said  section  in 
relation  to  the  receiving  and  disbursing  the  moneys  of  the 
United  States  :  Therefore  — 

Be  it  enacted,  etc.,  That  the  rooms  prepared  and  provided  in 
the  new  Treasury  building  at  the  seat  of  Government  for  the 
use  of  the  Treasurer  of  the  United  States,  his  assistants,  and 
clerks,  and  occupied  by  them,  and  also  the  fire-proof  vaults 
and  safes  erected  in  said  rooms  for  the  keeping  of  the  public 
moneys  in  the  possession  and  under  the  immediate  control  of 
said  Treasurer,  and  such  other  apartments  as  are  provided  for 
in  this  act  as  places  of  deposit  of  the  public  money,  are  hereby 
constituted  and  declared  to  be,  the  Treasury  of  the  United 
States.  And  all  moneys  paid  into  the  same  shall  be  subject  to 
the  draft  of  the  Treasurer,  drawn  agreeably  to  appropriations 
made  by  law. 

1  The  Subtreasury  Act  of  1840  was  so  similar  to  this  one  (now  in 
force)  that  it  is  omitted. 


APPENDIX  489 

[Sec.  2  provides  that  the  mints  at  Philadelphia  and  New 
Orleans  be  places  of  deposit  of  public  moneys  and  the  treasur- 
ers thereof  designated  assistant  treasurers  of  the  United  States.] 

[Secs.  3  and  4  provide  for  buildings  at  New  York,  Boston, 
Charleston  and  St.  Louis  as  places  of  deposit  of  public 
moneys,  assistant  treasurers  to  be  appointed  to  take  charge 
thereof.] 

Sec.  5.  That  the  President  shall  nominate,  and  by  and  with 
the  advice  and  consent  of  the  Senate  appoint,  four  officers,  to 
be  denominated  "assistant  treasurers  of  the  United  States," 
which  said  officers  shall  hold  their  respective  offices  for  the 
term  of  four  years,  unless  sooner  removed  therefrom;  one  of 
which  shall  be  located  at  the  city  of  New  York,  in  the  State  of 
New  York ;  one  other  of  which  shall  be  located  at  the  city 
of  Boston,  in  the  State  of  Massachusetts  ;  one  other  of  which 
shall  be  located  at  the  city  of  Charleston,  in  the  State  of  South 
Carolina  ;  and  one  other  at  St.  Louis,  in  the  State  of  Missouri. 
And  all  of  which  said  officers  shall  give  bonds  to  the  United 
States,  with  sureties,  according  to  the  provisions  hereinafter  con- 
tained, for  the  faithful  discharge  of  the  duties  of  their  respective 
offices. 

Sec.  6.  That  the  Treasurer  of  the  United  States,  the  treas- 
urer of  the  mint  of  the  United  States,  the  treasurers,  and  those 
acting  as  such,  of  the  various  branch  mints,  all  collectors  of 
the  customs,  all  assistant  treasurers,  all  receivers  of  public 
moneys  at  the  several  land  offices,  all  postmasters,  and  all  pub- 
lic officers  of  whatsoever  character,  be  and  they  are  hereby 
required  to  keep  safely,  without  loaning,  using,  depositing  in 
banks,  or  exchanging  for  other  funds  than  as  allowed  by  this  act, 
all  the  public  money  collected  by  them,  or  otherwise  at  any 
time  placed  in  their  possession  and  custody,  till  the  same  is  or- 
dered, by  the  proper  Department  or  officer  of  the  Government, 
to  be  transferred  or  paid  out ;  and,  when  such  orders  for  trans- 
fer or  payment  are  received,  faithfully  and  promptly  to  make 
the  same  as  directed,  and  to  do  and  perform  all  other  duties  as 
fiscal  agents  of  the  Government  which  may  be  imposed  by  this 
or  any  other  acts  of  Congress,  or  by  any  regulation  of  the 
Treasury  Department  made  in  conformity  to  law ;  and  also  to 
do  and  perform  all  acts  and  duties  required  by  law,  or  by  direc- 
tion of  any  of  the  Executive  Departments  of  the  Government, 
as  agents  for  paying  pensions,  or  for  making  any  other  disburse- 
ments which  either  of  the  heads  of  those  Departments  may  be 
required  by  law  to  make,  and  which  are  of  a  character  to  be 
made  by  the  depositaries  hereby  constituted,  consistently  with 
the  other  official  duties  imposed  upon  them. 


490  CONTEST  FOR  SOUND  MONEY 

[Secs.  7  and  8  provide  for  bonding  the  officers  designated 
in  the  act.] 

Sec.  9.  That  all  collectors  and  receivers  of  public  money,  of 
every  character  and  description,  within  the  District  of  Columbia, 
shall,  as  frequently  as  they  may  be  directed  by  the  Secretary  of 
the  Treasury,  or  the  Postmaster  General  so  to  do,  pay  over  to 
the  Treasurer  of  the  United  States,  at  the  Treasury,  all  public 
moneys  collected  by  them,  or  in  their  hands  ;  that  all  such  col- 
lectors and  receivers  of  public  moneys  within  the  cities  of 
Philadelphia  and  New  Orleans  shall,  upon  the  same  direction, 
pay  over  to  the  treasurers  of  the  mints  in  their  respective  cities, 
at  the  said  mints,  all  public  moneys  collected  by  them,  or  in 
their  hands  ;  and  that  all  such  collectors  and  receivers  of  public 
moneys  within  the  cities  of  New  York,  Boston,  Charleston,  and 
St.  Louis,  shall,  upon  the  same  direction,  pay  over  to  the  assist- 
ant treasurers  in  their  respective  cities,  at  their  offices,  respec- 
tively, all  the  public  moneys,  collected  by  them,  or  in  their 
hands,  to  be  safely  kept  by  the  said  respective  depositaries  until 
otherwise  disposed  of  according  to  law;  and  it  shall  be  the 
duty  of  the  said  Secretary  and  Postmaster  General  respectively 
to  direct  such  payments  by  the  said  collectors  and  receivers  at 
all  the  said  places,  at  least  as  often  as  once  in  each  week,  and 
as  much  more  frequently,  in  all  cases,  as  they  in  their  discretion 
may  think  proper. 

Sec.  10.  That  it  shall  be  lawful  for  the  Secretary  of  the 
Treasury  to  transfer  the  moneys  in  the  hands  of  any  depositary 
hereby  constituted  to  the  Treasury  of  the  United  States,  to  be 
there  safely  kept,  to  the  credit  of  the  Treasurer  of  the  United 
States,  according  to  the  provisions  of  this  act;  and  also  to 
transfer  moneys  in  the  hands  of  any  one  depositary  constituted 
by  this  act  to  any  other  depositary  constituted  by  the  same,  at 
his  discretion,  and  as  the  safety  of  the  public  moneys,  and  the 
convenience  of  the  public  service  shall  seem  to  him  to  require  ; 
which  authority  to  transfer  the  moneys  belonging  to  the  Post 
Office  Department  is  also  conferred  upon  the  Postmaster  Gen- 
eral, so  far  as  its  exercise  by  him  may  be  consistent  with  the 
provisions  of  existing  laws;  and  every  depositary  constituted 
by  this  act  shall  keep  his  account  of  the  money  paid  to  or 
deposited  by  him,  belonging  to  the  Post  Office  Department, 
separate  and  distinct  from  the  account  kept  by  him  of  other 
public  moneys  so  paid  or  deposited.  And  for  the  purpose  of 
payments  on  the  public  account,  it  shall  be  lawful  for  the 
Treasurer  of  the  United  States  to  draw  upon  any  of  the  said 
depositaries,  as  he  may  think  most  conducive  to  the  public 
interest,  or  to  the  convenience  of  the  public  creditors,  or  both. 


APPENDIX  491 

And  each  depositary  so  drawn  upon  shall  make  returns  to  the 
Treasury  and  Post  Office  Departments  of  all  moneys  received 
and  paid  by  him,  at  such  times  and  in  such  form  as  shall  be 
directed  by  the  Secretary  of  the  Treasury  or  the  Postmaster 
General. 

Sec.  1 1.  That  the  Secretary  of  the  Treasury  shall  be  and  he 
is  hereby  authorized  to  cause  examinations  to  be  made  of  the 
books,  accounts,  and  money  on  hand  of  the  several  depositaries 
constituted  by  this  act ;  and  for  that  purpose  to  appoint  special 
agents,  as  occasion  may  require,  with  such  compensation,  not 
exceeding  six  dollars  per  day  and  travelling  expenses,  as  he 
may  think  reasonable,  to  be  fixed  and  declared  at  the  time  of 
each  appointment.  The  agents  selected  to  make  these  exami- 
nations shall  be  instructed  to  examine  as  well  the  books,  ac- 
counts, and  returns  of  the  officer,  as  the  money  on  hand,  and 
the  manner  of  its  being  kept,  to  the  end  that  uniformity  and 
accuracy  in  the  accounts,  as  well  as  safety  to  the  public  moneys, 
may  be  secured  thereby. 

Sec.  12.  That,  in  addition  to  the  examinations  provided  for 
in  the  last  preceding  section,  and  as  a  further  guard  over  the 
public  moneys,  it  shall  be  the  duty  of  each  naval  officer  and 
surveyor,  as  a  check  upon  the  assistant  treasurers,  or  the  col- 
lectors of  the  customs,  of  their  respective  districts ;  of  each 
register  of  a  land  office,  as  a  check  upon  the  receiver  of  his 
land  office  ;  and  of  the  director  and  superintendent  of  each 
mint  and  branch  mint,  when  separate  officers,  as  a  check  upon 
the  treasurers,  respectively,  of  the  said  mints,  or  the  persons 
acting  as  such,  at  the  close  of  each  quarter  of  the  year,  and  as 
much  more  frequently  as  they  shall  be  directed  by  the  Secre- 
tary of  the  Treasury  to  do  so,  to  examine  the  books,  accounts, 
returns,  and  money  on  hand,  of  the  assistant  treasurers,  col- 
lectors, receivers  of  land  offices,  treasurers  of  the  mint,  and 
each  branch  mint,  and  persons  acting  as  such,  and  to  make  a 
full,  accurate,  and  faithful  return  to  the  Treasury  Department 
of  their  condition. 

[Sec.  13  makes  provision  for  clerks,  etc.,  for  these  offices.] 

Sec.  14.  That  the  Secretary  of  the  Treasury  may,  at  his  dis- 
cretion, transfer  the  balances  remaining  with  any  of  the  present 
depositories,  as  he  may  deem  the  safety  of  the  public  money 
or  the  public  convenience  may  require  :  Provided,  That  noth- 
ing in  this  act  shall  be  so  construed  as  to  authorize  the  Secretary 
of  the  Treasury  to  transfer  the  balances  remaining  with  any  of 
the  present  depositories  to  the  depositories  constituted  by  this 
act  before  the  first  day  of  January  next :  And,  provided,  That, 
for  the  purpose  of  payments  on  public  account,  out  of  bal- 


492  CONTEST  FOR  SOUND  MONEY 

ances  remaining  with  the  present  depositories,  it  shall  be  lawful 
for  the  Treasurer  of  the  United  States  to  draw  upon  any  of  the 
said  depositories  as  he  may  think  most  conducive  to  the  public 
interests,  or  to  the  convenience  of  the  public  creditors,  or 
both. 

[Sec.  15  provides  that  all  officers  and  others  having  money 
to  pay  to  the  United  States  may  do  so  at  the  sub- treasuries 
established.] 

Sec.  16.  That  all  officers  and  other  persons,  charged  by  this 
act,  or  any  other  act,  with  the  safe-keeping,  transfer,  and  dis- 
bursement of  the  public  moneys,  other  than  those  connected 
with  the  Post  Office  Department,  are  hereby  required  to  keep 
an  accurate  entry  of  each  sum  received,  and  of  each  payment 
or  transfer ;  and  that  if  any  one  of  the  said  officers,  or  of  those 
connected  with  the  Post  Office  Department,  shall  convert  to 
his  own  use,  in  any  way  whatever,  or  shall  use,  by  way  of  invest- 
ment in  any  kind  of  property  or  merchandise,  or  shall  loan, 
with  or  without  interest,  or  shall  deposite  in  any  bank,  or  shall 
exchange  for  other  funds,  except  as  allowed  by  this  act,  any 
portion  of  the  public  moneys  intrusted  to  him  for  safe-keeping, 
disbursement,  transfer,  or  for  any  other  purpose,  every  such  act 
shall  be  deemed  and  adjudged  to  be  an  embezzlement  of  so 
much  of  the  said  moneys  as  shall  be  thus  taken,  converted,  in- 
vested, used,  loaned,  deposited,  or  exchanged,  which  is  hereby 
declared  to  be  a  felony ;  and  any  failure  to  pay  over  or  to  pro- 
duce the  public  moneys  intrusted  to  such  person  shall  be  held 
and  taken  to  be  prima  facie  evidence  of  such  embezzlement; 
and  if  any  officer  charged  with  the  disbursements  of  public 
moneys  shall  accept  or  receive,  or  transmit  to  the  Treasury  De- 
partment to  be  allowed  in  his  favor,  any  receipt  or  voucher  from 
a  creditor  of  the  United  States,  without  having  paid  to  such 
creditor,  in  such  funds  as  the  said  officer  may  have  received  for 
disbursement,  or  such  other  funds  as  he  may  be  authorized  by  this 
act  to  take  in  exchange,  the  full  amount  specified  in  such  receipt 
or  voucher,  every  such  act  shall  be  deemed  to  be  a  conversion 
by  such  officer  to  his  own  use  of  the  amount  specified  in  such 
receipt  or  voucher ;  and  any  officer  or  agent  of  the  United 
States,  and  all  persons  advising  or  participating  in  such  act, 
being  convicted  thereof  before  any  court  of  the  United  States 
of  competent  jurisdiction,  shall  be  sentenced  to  imprisonment 
for  a  term  of  not  less  than  six  months  nor  more  than  ten  years, 
and  to  a  fine  equal  to  the  amount  of  the  money  embezzled. 
And  upon  the  trial  of  any  indictment  against  any  person  for 
embezzling  public  money  under  the  provisions  of  this  act,  it 
shall  be  sufficient  evidence,  for  the  purpose  of  showing  a  bal- 


APPENDIX  493 

ance  against  such  person,  to  produce  a  transcript  from  the  books 
and  proceedings  of  the  Treasury,  as  required  in  civil  cases, 
under  the  provisions  of  the  act  entitled  "  An  act  to  provide 
more  effectually  for  the  settlement  of  accounts  between  the 
United  States  and  receivers  of  public  money,"  approved  March 
3,  1 797  ;  and  the  provisions  of  this  act  shall  be  so  construed  as 
to  apply  to  all  persons  charged  with  the  safe-keeping,  transfer, 
or  disbursement  of  the  public  money,  whether  such  persons  be 
indicted  as  receivers  or  depositaries  of  the  same ;  and  the 
refusal  of  such  person,  whether  in  or  out  of  office,  to  pay  any 
draft,  order,  or  warrant  which  may  be  drawn  upon  him  by  the 
proper  officer  of  the  Treasury  Department,  for  any  public  money 
in  his  hands  belonging  to  the  United  States,  no  matter  in  what 
capacity  the  same  may  have  been  received  or  may  be  held, 
or  to  transfer  or  disburse  any  such  money  promptly,  upon  the 
legal  requirement  of  any  authorized  officer  of  the  United 
States,  shall  be  deemed  and  taken,  upon  the  trial  of  any  indict- 
ment against  such  person  for  embezzlement,  as  prima  facie 
evidence  of  such  embezzlement. 

[Sec.  i  7  provides  that  until  proper  offices  are  fitted  up,  tem- 
porary ones  shall  be  furnished.] 

And  whereas,  by  the  thirtieth  section  of  the  act  entitled  "  An 
act  to  regulate  the  collection  of  duties  imposed  by  law  on  the 
tonnage  of  ships  or  vessels,  and  on  goods,  wares,  and  merchan- 
dises imported  into  the  United  States,"  approved  July  31,  1789, 
it  was  provided  that  all  fees  and  dues  collected  by  virtue  of  that 
act  should  be  received  in  gold  and  silver  coin  only  ;  and  whereas, 
also,  by  the  fifth  section  of  the  act  approved  May  10, 1800,  en- 
titled "  An  act  to  amend  the  act  entitled  '  An  act  providing  for 
the  sale  of  the  lands  of  the  United  States  in  the  territory  north- 
west of  the  Ohio,  and  above  the  mouth  of  Kentucky  river,'  " 
it  was  provided  that  payment  for  the  said  lands  shall  be  made 
by  all  purchasers  in  specie,  or  in  evidence  of  the  public  debt; 
and  whereas,  experience  has  proved  that  said  provisions  ought 
to  be  revived  and  enforced,  according  to  the  true  and  "wise  in- 
tent of  the  Constitution  of  the  United  States  — 

Sec.  18.  That  on  the  first  day  of  January,  1847,  and  there- 
after, all  duties,  taxes,  sales  of  public  lands,  debts,  and  sums  of 
money  accruing  or  becoming  due  to  the  United  States,  and  also 
all  sums  due  for  postages  or  otherwise,  to  the  General  Post  Office 
Department,  shall  be  paid  in  gold  and  silver  coin  only,  or  in 
Treasury  notes  issued  under  the  authority  of  the  United  States  : 
Provided,  That  the  Secretary  of  the  Treasury  shall  publish, 
monthly,  in  two  newspapers  at  the  city  of  Washington,  the 
amount  of  specie  at  the  several  places  of  deposite,  the  amount 


494  CONTEST  FOR  SOUND  MONEY 

of  Treasury  notes  or  drafts  issued,  and  the  amount  outstanding 
on  the  last  day  of  each  month. 

Sec.  19.  That  on  the  first  day  of  April,  1847,  and  thereafter, 
every  officer  or  agent  engaged  in  making  disbursements  on  ac- 
count of  the  United  States,  or  of  the  General  Post  Office,  shall 
make  all  payments  in  gold  and  silver  coin,  or  in  Treasury  notes, 
if  the  creditor  agree  to  receive  said  notes  in  payment ;  and  any 
receiving  or  disbursing  officer  or  agent  who  shall  neglect,  evade, 
or  violate  the  provisions  of  this  and  the  last  preceding  section 
of  this  act,  shall,  by  the  Secretary  of  the  Treasury,  be  immedi- 
ately reported  to  the  President  of  the  United  States,  with  the 
facts  of  such  neglect,  evasion,  or  violation ;  and  also  to  Con- 
gress, if  in  session  ;  and  if  not  in  session,  at  the  commencement 
of  its  session  next  after  the  violation  takes  place. 

Sec.  20.  That  no  exchange  of  funds  shall  be  made  by  any 
disbursing  officers  or  agents  of  the  Government,  of  any  grade 
or  denominations  whatsoever,  or  connected  with  any  branch  of 
the  public  service,  other  than  on  exchange  for  gold  and  silver ; 
and  every  such  disbursing  officer,  when  the  means  for  his  dis- 
bursements are  furnished  to  him  in  gold  and  silver,  shall  make 
his  payments  in  the  money  so  furnished ;  or  when  those  means 
are  furnished  to  him  in  drafts,  shall  cause  those  drafts  to  be 
presented  at  their  place  of  payment,  and  properly  paid  accord- 
ing to  the  law,  and  shall  make  his  payments  in  the  money  so 
received  for  the  drafts  furnished,  unless,  in  either  case,  he  can 
exchange  the  means  in  his  hands  for  gold  and  silver  at  par. 
And  it  shall  be  and  is  hereby  made  the  duty  of  the  head  of  the 
proper  Department  immediately  to  suspend  from  duty  any  dis- 
bursing officer  who  shall  violate  the  provisions  of  this  section, 
and  forthwith  to  report  the  name  of  the  officer  or  agent  to  the 
President,  with  the  fact  of  the  violation,  and  all  the  circum- 
stances accompanying  the  same  and  within  the  knowledge  of 
the  said  Secretary,  to  the  end  that  such  officer  or  agent  may  be 
promptly  removed  from  office,  or  restored  to  his  trust  and  the 
performance  of  his  duties,  as  to  the  President  may  seem  just 
and  proper  :  Provided,  however,  That  those  disbursing  officers, 
having  at  present  credits  in  the  banks,  shall,  until  the  first  day 
of  January  next,  be  allowed  to  check  on  the  same,  allowing  the 
public  creditors  to  receive  their  pay  from  the  banks  either  in 
specie  or  bank  notes. 

Sec.  21.  That  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury  to  issue  and  publish  regulations  to  enforce  the 
speedy  presentation  of  all  Government  drafts  for  payment  at 
the  places  where  payable,  and  to  prescribe  the  time,  according 
to  the  different  distances  of  the  depositaries  from  the  seat  of 


APPENDIX  495 

Government,  within  which  all  drafts  upon  them,  respectively, 
shall  be  presented  for  payment ;  and,  in  default  of  such  pres- 
entation, to  direct  any  other  mode  and  place  of  payment 
which  he  may  deem  proper ;  but,  in  all  these  regulations  and 
directions,  it  shall  be  the  duty  of  the  Secretary  of  the  Treasury 
to  guard,  as  far  as  may  be,  against  those  drafts  being  used  or 
thrown  into  circulation  as  a  paper  currency  or  medium  of  ex- 
change. And  no  officer  of  the  United  States  shall,  either 
directly  or  indirectly,  sell  or  dispose  of  to  any  person  or  persons, 
or  corporations,  whatsoever,  for  a  premium,  any  Treasury  note, 
draft,  warrant,  or  other  public  security,  not  his  private  property, 
or  sell  or  dispose  of  the  avails  or  proceeds  of  such  note,  draft, 
warrant,  or  security  in  his  hands  for  disbursement,  without 
making  return  of  such  premium,  and  accounting  therefor  by 
charging  the  same  in  his  accounts  to  the  credit  of  the  United 
States ;  and  any  officer  violating  this  section  shall  be  forthwith 
dismissed  from  office. 

[Secs.  22  and  23  make  provision  for  salaries  and  expenses 
of  the  offices  ;  prohibit  assistant  treasurers  from  receiving  com- 
missions for  services.] 

[Sec.  24  repeals  laws  in  conflict  herewith.] 

Note.  —  In  appropriation  and  other  acts,  Congress  authorized  the  estab- 
lishment of  other  sub-treasuries,  and  a  class  of  designated  depositaries 
(individuals)  at  selected  points.  All  of  the  latter  were  discontinued, —  finally 
in  1879.  Sub-treasuries  now  existing  under  the  laws  are  located  at  Boston, 
New  York,  Philadelphia,  Baltimore,  Cincinnati,  Chicago,  St.  Louis,  New 
Orleans,  and  San  Francisco.  There  is  no  longer  any  official  connection 
with  the  mint  offices  as  was  originally  the  case. 

Act  of  February  21,1853  —  Amendatory  of  existing  laws  relative 
to  the  half  dollar,  quarter  dollar,  dime,  and  half  dime 

Be  it  enacted,  etc.,  That  from  and  after  the  first  day  of  June, 
1853,1  the  weight  of  the  half  dollar,  or  piece  of  50  cents, 
shall  be  192  grains,  and  the  quarter  dollar,  dime,  and  half 
dime,  shall  be,  respectively,  one-half,  one-fifth,  and  one-tenth 
of  the  weight  of  said  half  dollar. 

Sec.  2.  That  the  silver  coins  issued  in  conformity  with  the 
above  section,  shall  be  legal  tenders  in  payment  of  debts  for 
all  sums  not  exceeding  $5. 

Sec.  3.  That  in  order  to  procure  bullion  for  the  requisite 
coinage  of  the  subdivisions  of  the  dollar  authorized  by  this 
act,  the  Treasurer  of  the  Mint  shall,  with   the  approval  of 

1  By  Sec.  7  of  an  Act  of  March  3,  1853,  this  act  was  made  to  take 
effect  on  April  I,  1853. 


496  CONTEST  FOR  SOUND  MONEY 

the  Director,  purchase  such  bullion  with  the  bullion  fund  of  the 
mint.  He  shall  charge  himself  with  the  gain  arising  from  the 
coinage  of  such  bullion  into  coins  of  a  nominal  value  exceeding 
the  intrinsic  value  thereof,  and  shall  be  credited  with  the  dif- 
ference between  such  intrinsic  value  and  the  price  paid  for  said 
bullion,  and  with  the  expense  of  distributing  said  coins  as  here- 
inafter provided.  The  balances  to  his  credit,  or  the  profit  of 
said  coinage,  shall  be,  from  time  to  time,  on  a  warrant  of  the 
Director  of  the  mint,  transferred  to  the  account  of  the  Treasury 
of  the  United  States. 

Sec.  4.  That  such  coins  shall  be  paid  out  at  the  mint,  in 
exchange  for  gold  coins  at  par,  in  sums  not  less  than  $100; 
and  it  shall  be  lawful,  also,  to  transmit  parcels  of  the  same, 
from  time  to  time,  to  the  assistant  treasurers,  depositaries,  and 
other  officers  of  the  United  States,  under  general  regulations, 
proposed  by  the  Director  of  the  Mint,  and  approved  by  the 
Secretary  of  the  Treasury  :  Provided,  however,  That  the  amount 
coined  into  quarter  dollars,  dimes,  and  half  dimes,  shall  be  reg- 
ulated by  the  Secretary  of  the  Treasury. 

Sec.  5.  That  no  deposits  for  coinage  into  the  half  dol- 
lar, quarter  dollar,  dime,  and  half  dime,  shall  hereafter  be 
received,  other  than  those  made  by  the  Treasurer  of  the  Mint, 
as  herein  authorized,  and  upon  account  of  the  United  States. 

[Sec.  6  provides  for  casting  bars  for  depositors  of  bullion.] 

[Sec.  7  provides  for  a  $3  piece.] 

Sec.  8.  That  this  act  shall  be  in  force  from  and  after  the 
first  day  of  June  next. 

Act  of  March  3,  1853 —  {Establishing  assay  office  in  New  York 

City] 

Sec.  10.  That  the  Secretary  of  the  Treasury  is  hereby 
authorized  and  required  to  establish  in  the  City  of  New  York 
an  office  for  the  receipt  and  for  the  melting,  refining,  parting, 
and  assaying  of  gold  and  silver  bullion  and  foreign  coin,  and 
for  casting  the  same  into  bars,  ingots  or  disks.  .  .  . 

Sec.  11.  That  the  owner  or  owners  of  any  gold  or  silver 
bullion,  in  dust  or  otherwise,  or  of  any  foreign  coin,  shall  be 
entitled  to  deposit  the  same  in  said  office,  and  the  treasurer 
thereof  shall  give  a  receipt,  stating  the  weight  and  description 
thereof,  in  the  manner  and  under  the  regulations  that  are  or 
may  be  provided  in  like  cases  or  deposits  at  the  Mint  of  the 
United  States  with  the  treasurer  thereof.  And  such  bullion 
shall,  without  delay,  be  melted,  parted,  refined,  and  assayed, 


APPENDIX  497 

and  the  net  value  thereof,  and  of  all  foreign  coins  deposited  in 
said  office,  shall  be  ascertained ;  and  the  treasurer  shall  there- 
upon forthwith  issue  his  certificate  of  the  net  value  thereof, 
payable  in  coins  of  the  same  metal  as  that  deposited,  either  at 
the  office  of  the  Assistant  Treasurer  of  the  United  States,  in 
New  York,  or  at  the  Mint  of  the  United  States,  at  the  option 
of  the  depositor,  to  be  expressed  in  the  certificate,  which  certif- 
icates shall  be  receivable  at  any  time  within  sixty  days  from  the 
date  thereof  in  payment  of  all  debts  due  to  the  United  States  at 
the  port  of  New  York  for  the  full  sum  therein  certified.  .  .  . 


Act  of  February  21,  1857 — Relating  to  foreign  coins,  and  to  the 
coinage  of  cents 

Be  it  enacted,  etc.,  That  the  pieces  commonly  known  as  the 
quarter,  eighth,  and  sixteenth  of  the  Spanish  pillar  dollar,  and 
of  the  Mexican  dollar,  shall  be  receivable  at  the  Treasury  of 
the  United  States,  and  its  several  offices,  and  at  the  several 
post-offices,  and  land-offices,  at  the  rates  of  valuation  following, 
—  that  is  to  say,  the  fourth  of  a  dollar,  or  piece  of  two  reals,  at 
20  cents  ;  the  eighth  of  a  dollar,  or  piece  of  one  real,  at  10 
cents ;  and  the  sixteenth  of  a  dollar,  or  half  real,  at  5  cents. 

Sec.  2.  That  the  said  coins,  when  so  received,  shall  not 
again  be  paid  out,  or  put  in  circulation,  but  shall  be  recoined 
at  the  Mint.  And  it  shall  be  the  duty  of  the  Director  of  the 
Mint,  with  the  approval  of  the  Secretary  of  the  Treasury,  to 
prescribe  such  regulations  as  may  be  necessary  and  proper,  to 
secure  their  transmission  to  the  Mint  for  recoinage,  and  the 
return  or  distribution  of  the  proceeds  thereof,  when  deemed 
expedient,  and  to  prescribe  such  forms  of  account  as  may  be 
appropriate  and  applicable  to  the  circumstances :  Provided, 
that  the  expenses  incident  to  such  transmission  or  distribution, 
and  of  recoinage,  shall  be  charged  against  the  account  of  silver 
profit  and  loss,  and  the  net  profits,  if  any,  shall  be  paid  from 
time  to  time  into  the  Treasury  of  the  United  States. 

Sec.  3.  That  all  former  acts  authorizing  the  currency  of 
foreign  gold  or  silver  coins,  and  declaring  the  same  a  legal 
tender  in  payment  for  debts,  are  hereby  repealed  ;  but  it  shall 
be  the  duty  of  the  director  of  the  mint  to  cause  assays  to  be 
made,  from  time  to  time,  of  such  foreign  coins  as  may  be 
known  to  our  commerce,  to  determine  their  average  weight, 
fineness,  and  value,  and  to  embrace  in  his  annual  report  a 
statement  of  the  results  thereof. 

[Secs.  4  to  7  relate  to  minor  coins,  etc.] 
2  K 


498  CONTEST  FOR  SOUND  MONEY 

The  Act  of  December  23,  1857,  authorized  issues  of  treasury 
notes  for  one  year  only,  and  for  their  reissue  when  received  into 
the  Treasury.  The  act  contained  no  provisions  not  already  in 
previous  acts  except  to  limit  denominations  to  $100  and  over. 

Act  of  March  3,  1859  and 

Act  of  June  22,  i860,  extended  the  time  limit  of  the  issue. 

The  Act  of  December  17,  i860,  practically  re-enacted  the 
provisions  of  the  act  of  1857,  authorizing  notes  as  low  as  $50. 

Acts  of  February  8,  1861,  and  March  2,  1861,  provided  for 
bond  issues  to  retire  Treasury  notes. 


Act  of  July  1 7, 1 86 1  —  To  authorize  a  national  loan,  and  for  other 
purposes 

Be  it  enacted,  etc.  [Authorizes  a  loan  of  $250,000,000,  in 
twenty-year  bonds  at  7  per  cent,  interest,  or  three-year  treasury 
notes  of  denominations  not  less  than  $50,  at  7.3  per  cent,  inter- 
est.] And  the  Secretary  of  the  Treasury  may  also  issue  in  ex- 
change for  coin,  and  as  part  of  the  above  loan,  or  may  pay  for 
salaries  or  other  dues  from  the  United  States,  treasury  notes  of 
a  less  denomination  than  $50,  not  bearing  interest,  but  payable 
on  demand  by  the  Assistant  Treasurers  of  the  United  States  at 
Philadelphia,  New  York,  or  Boston,  or  treasury  notes  bearing 
interest  at  the  rate  of  3.65  per  centum,  payable  in  one  year  from 
date,  and  exchangeable  at  any  time  for  treasury  notes  for  $50 
and  upwards,  issuable  under  the  authority  of  this  act,  and  bear- 
ing interest  as  specified  above  :  Provided,  That  no  exchange  of 
such  notes  in  any  less  amount  than  $100  shall  be  made  at  any 
one  time  :  And  provided  further,  That  no  treasury  notes  shall  be 
issued  of  a  less  denomination  than  $io,x  and  that  the  whole 
amount  of  treasury  notes,  not  bearing  interest,  issued  under  the 
authority  of  this  act,  shall  not  exceed  $5 0,000,000. 

********** 

Sec.  6.  That  whenever  any  treasury  notes  of  a  denomination 
less  than  $50,  authorized  to  be  issued  by  this  act,  shall  have 
been  redeemed,  the  Secretary  of  the  Treasury  may  reissue  the 
same,  or  may  cancel  them  and  issue  new  notes  to  an  equal 
amount :  Provided,  That  the  aggregate  amount  of  bonds  and 
treasury  notes  issued  under  the  foregoing  provisions  of  this  act 
shall  never  exceed  the  full  amount  authorized  by  the  first  sec- 
tion of  this  act ;  and  the  power  to  issue  or  reissue  such  notes 
shall  cease  and  determine  after  the  31st  of  December,  1862. 

1  Changed  to  $5  by  Act  of  August  5,  1861,  Sec.  3. 


APPENDIX  499 

Sec.  7.  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized, whenever  he  shall  deem  it  expedient,  to  issue  in  exchange 
for  coin,  or  in  payment  for  public  debts,  treasury  notes  of  any 
of  the  denominations  hereinbefore  specified,  bearing  interest 
not  exceeding  6  per  centum  per  annum,  and  payable  at  any 
time  not  exceeding  12  months  from  date,  provided  that  the 
amount  of  notes  so  issued,  or  paid,  shall  at  no  time  exceed 
$20,000,000. 


Act  of  August  5,  1 86 1  —  [Amending  the  preceding  act] 

Be  it  etiacted,  etc.,  .  .  .  any  part  of  the  Treasury  notes  pay- 
able on  demand,  authorized  by  said  act  [of  July  17,  1861],  may 
be  made  payable  by  the  Assistant  Treasurer  at  St.  Louis,  or  by 
the  depositary  at  Cincinnati. 

[Sec.  2.    How  Treasury  notes  shall  be  signed.] 

Sec.  3.  That  so  much  of  the  act  to  which  this  is  supple- 
mentary as  limits  the  denomination  of  a  portion  of  the  Treasury 
notes  authorized  by  said  act  at  not  less  than  $10,  be  and  is  so 
modified  as  to  authorize  the  Secretary  of  the  Treasury  to  fix  the 
denomination  of  said  notes  at  not  less  than  $5. 

[Sec.  4.    Appropriation  of  $100,000  for  expenses.] 

Sec.  5.  That  the  Treasury  notes  authorized  by  the  act  to 
which  this  is  supplementary,  of  a  less  denomination  than  $50, 
payable  on  demand  without  interest,  and  not  exceeding  in 
amount  the  sum  of  $50,000,000,  shall  be  receivable  in  payment 
of  public  dues. 

Sec.  6.  That  the  provisions  of  the  act  entitled  "  An  act  to 
provide  for  the  better  organization  of  the  Treasury,  etc.,"  passed 
August  6,  1846,  be  and  the  same  are  hereby  suspended,  so  far 
as  to  allow  the  Secretary  of  the  Treasury  to  deposit  any  of  the 
moneys  obtained  on  any  of  the  loans  now  authorized  by  law,  to 
the  credit  of  the  Treasurer  of  the  United  States,  in  such  solvent 
specie-paying  banks  as  he  may  select ;  and  the  said  moneys,  so 
deposited,  may  be  withdrawn  from  such  deposit  for  deposit  with 
the  regular  authorized  depositaries,  or  for  the  payment  of  pub- 
lic dues,  or  paid  in  redemption  of  the  notes  authorized  to  be 
issued  under  this  act  or  the  act  to  which  this  is  supplementary, 
payable  on  demand,  as  may  seem  expedient  to,  or  be  directed 
by,  the  Secretary  of  the  Treasury. 

[Sec.  7.  May  sell  bonds  under  Act  of  July  17,  1861,  bear- 
ing not  more  than  6  per  centum  at  rate  not  less  than  equivalent 
to  7  per  centum  bonds  at  par.] 


500  CONTEST  FOR  SOUND  MONEY 

Act  of  February  12,  1862  —  Authorized  an  additional  issue  of 
$10,000,000  demand  notes. 

Act  of  February  25,  1862  —  To  authorize  the  issue  of  United 
States  notes,  and  for  the  redemption  or  funding  thereof  and 
for  funding  the  floating  debt  of  the  United  States 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is 
hereby  authorized  to  issue,  on  the  credit  of  the  United  States, 
$150,000,000  of  United  States  notes,  not  bearing  interest,  pay- 
able to  bearer,  at  the  Treasury  of  the  United  States,  and  of 
such  denominations  as  he  may  deem  expedient,  not  less  than 
$5  each  :  Provided,  however,  That  fifty  millions  of  said  notes 
shall  be  in  lieu  of  the  demand  Treasury  notes  authorized  to  be 
issued  by  the  act  of  July  17,  1861  ;  which  said  demand  notes 
shall  be  taken  up  as  rapidly  as  practicable,  and  the  notes  herein 
provided  for  substituted  for  them  :  And  provided  further,  That 
the  amount  of  the  two  kinds  of  notes  together  shall  at  no  time 
exceed  the  sum  of  $150,000,000,  and  such  notes  herein 
authorized  shall  be  receivable  in  payment  of  all  taxes,  internal 
duties,  excises,  debts,  and  demands  of  every  kind  due  to  the 
United  States,  except  duties  on  imports,  and  of  all  claims  and 
demands  against  the  United  States  of  every  kind  whatsoever, 
except  for  interest  upon  bonds  and  notes,  which  shall  be  paid 
in  coin,  and  shall  also  be  lawful  money  and  a  legal  tender  in 
payment  of  all  debts,  public  and  private,  within  the  United 
States,  except  duties  on  imports  and  interest  as  aforesaid. 
And  any  holders  of  said  United  States  notes  depositing  any 
sum  not  less  than  $50  or  some  multiple  of  $50,  with  the 
Treasurer  of  the  United  States,  or  either  of  the  Assistant 
Treasurers,  shall  receive  in  exchange  therefor  duplicate  certifi- 
cates of  deposit,  one  of  which  may  be  transmitted  to  the 
Secretary  of  the  Treasury,  who  shall  thereupon  issue  to  the 
holder  an  equal  amount  of  bonds  of  the  United  States,  coupon 
or  registered,  as  may  by  said  holder  be  desired,  bearing  interest 
at  the  rate  of  6  per  centum  per  annum,  payable  semi-annually, 
and  redeemable  at  the  pleasure  of  the  United  States  after  5 
years,  and  payable  20  years  from  the  date  thereof.  And  such 
United  States  notes  shall  be  received  the  same  as  coin,  at  their 
par  value,  in  payment  for  any  loans  that  may  be  hereafter  sold 
or  negotiated  by  the  Secretary  of  the  Treasury,  and  may  be 
reissued  from  time  to  time  as  the  exigencies  of  the  public 
interest  shall  require. 

Sec.  2.  That,  to  enable  the  Secretary  of  the  Treasury  to 
fund  the  Treasury  notes  and  floating  debt  of  the  United  States, 


APPENDIX  501 

he  is  hereby  authorized  to  issue,  on  the  credit  of  the  United 
States,  coupon  bonds  or  registered  bonds,  to  an  amount  not 
exceeding  $500,000,000,  redeemable  at  the  pleasure  of  the 
United  States  after  5  years,  and  payable  20  years  from  date, 
and  bearing  interest  at  the  rate  of  6  per  centum  per  annum, 
payable  semi-annually.  And  the  bonds  herein  authorized  shall 
be  of  such  denominations,  not  less  than  $50,  as  may  be  deter- 
mined upon  by  the  Secretary  of  the  Treasury.  And  the  Secre- 
tary of  the  Treasury  may  dispose  of  such  bonds  at  any  time,  at 
the  market  value  thereof,  for  the  coin  of  the  United  States,  or 
for  any  of  the  Treasury  notes  that  have  been  or  may  hereafter 
be  issued  under  any  former  act  of  Congress,  or  for  United 
States  notes  that  may  be  issued  under  the  provisions  of  this 
act ;  and  all  stocks,  bonds,  and  other  securities  of  the  United 
States  held  by  individuals,  corporations,  or  associations,  within 
the  United  States,  shall  be  exempt  from  taxation  by  or  under 
State  authority. 

[Sec.  3.  Form  of  bond ;  how  signed,  etc. ;  appropriation 
for  expenses.] 

Sec.  4.  That  the  Secretary  of  the  Treasury  may  receive 
from  any  person  or  persons,  or  any  corporation,  United  States 
notes  on  deposit  for  not  less  than  30  days,  in  sums  of  not  less 
than  $100,  with  any  of  the  Assistant  Treasurers  or  designated 
depositaries  of  the  United  States  authorized  by  the  Secretary 
of  the  Treasury  to  receive  them,  who  shall  issue  therefor  certifi- 
cates of  deposit  made  in  such  form  as  the  Secretary  of  the 
Treasury  shall  prescribe,  and  said  certificates  of  deposit  shall 
bear  interest  at  the  rate  of  5  per  centum  per  annum  ;  and 
any  amount  of  United  States  notes  so  deposited  may  be  with- 
drawn from  deposit  at  any  time  after  10  days'  notice  on  the 
return  of  said  certificates  :  Provided,  That  the  interest  on  all 
such  deposits  shall  cease  and  determine  at  the  pleasure  of  the 
Secretary  of  the  Treasury  :  And  provided  further,  That  the 
aggregate  of  such  deposit  shall  at  no  time  exceed  the  amount 
of  $25,000,000.* 

Sec.  5.  That  all  duties  on  imported  goods  shall  be  paid  in 
coin,  or  in  notes  payable  on  demand  heretofore  authorized 
to  be  issued  and  by  law  receivable  in  payment  of  public  dues, 
and  the  coin  so  paid  shall  be  set  apart  as  a  special  fund,  and 
shall  be  applied  as  follows  : 

First.  To  the  payment  in  coin  of  the  interest  on  the  bonds 
and  notes  of  the  United  States. 


1  See  increase  to  $50,000,000  by  Act  of  March  17,  1862,  Sec.  2,  and  by 
Act  of  July  11,  1862,  Sec.  3,  to  $100,000,000. 


502  CONTEST  FOR  SOUND  MONEY 

Second.  To  the  purchase  or  payment  of  one  per  centum  of 
the  entire  debt  of  the  United  States,  to  be  made  within  each 
fiscal  year  after  the  first  day  of  July,  1862,  which  is  to  be  set 
apart  as  a  sinking  fund,  and  the  interest  of  which  shall  in  like 
manner  be  applied  to  the  purchase  or  payment  of  the  public 
debt  as  the  Secretary  of  the  Treasury  shall  from  time  to  time 
direct. 

Third.  The  residue  thereof  to  be  paid  into  the  Treasury  of 
the  United  States. 

[Secs.  6  and  7  prohibit,  and  provide  penalties  for,  all 
counterfeiting,  forging,  etc.] 

Act  of  March  1,  1862  —  To  authorize  the  Secretary  of  the 
Treasury  to  issue  certificates  of  indebtedness  to  public 
creditors 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  be, 
and  he  is  hereby  authorized,  to  cause  to  be  issued  to  any 
public  creditor  who  may  be  desirous  to  receive  the  same,  upon 
requisition  of  the  head  of  the  proper  department,  in  satisfac- 
tion of  audited  and  settled  demands  against  the  United  States, 
certificates  for  the  whole  amount  due,  or  parts  thereof  not  less 
than  $1000,  signed  by  the  Treasurer  of  the  United  States,  and 
countersigned  as  may  be  directed  by  the  Secretary  of  the 
Treasury;  which  certificates  shall  be  payable  in  one  year  from 
date  or  earlier,  at  the  option  of  the  Government,  and  shall 
bear  interest  at  the  rate  of  6  per  centum  per  annum. 

Act  of  March  17,  1862  —  To  authorize  the  purchase  of  coin, 
and  for  other  purposes 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  may 
purchase  coin  with  any  of  the  bonds  or  notes  of  the  United 
States,  authorized  by  law,  at  such  rates  and  upon  such  terms  as 
he  may  deem  most  advantageous  to  the  public  interest ;  and 
may  issue,  under  such  rules  and  regulations  as  he  may  prescribe, 
certificates  of  indebtedness,  such  as  are  authorized  by  an  act 
entitled  "An  act  to  authorize  the  Secretary  of  the  Treasury 
to  issue  certificates  of  indebtedness  to  public  creditors,"  ap- 
proved March  1st,  1862,  to  such  creditors  as  may  desire  to  receive 
the  same,  in  discharge  of  checks  drawn  by  disbursing-officers 
upon  sums  placed  to  their  credit  on  the  books  of  the  Treasurer, 
upon  requisitions  of  the  proper  departments,  as  well  as  in  dis- 
charge of  audited  and  settled  accounts,  as  provided  by  said  act. 

Sec.  2.   That  the  demand  notes  authorized  by  the  act  of 


APPENDIX  503 

July  17,  1861,  and  the  act  of  February  12,  1862,  shall,  in 
addition  to  being  receivable  in  payment  of  duties  on  imports, 
be  receivable,  and  shall  be  lawful  money  and  a  legal  tender,  in 
like  manner, and  for  the  same  purposes,  and  to  the  same  extent,  as 
the  notes  authorized  by  an  act  entitled  "  An  act  to  authorize  the 
issue  of  United  States  notes,"  etc.,  approved  February  25, 1862. 

[Sec.  3  authorizes  temporary  deposits  to  an  amount  not 
exceeding  $50,000,000,  rates  of  interest  prescribed  by  the 
Secretary  of  the  Treasury  not  exceeding  the  annual  rate  of 
5  per  centum.] 

Sec.  4.  That,  in  all  cases  where  the  Secretary  of  the 
Treasury  is  authorized  by  law  to  reissue  notes,  he  may  replace 
such  as  are  so  mutilated  or  otherwise  injured  as  to  be  unfit  for 
use  with  others  of  the  same  character  and  amount ;  and  such 
mutilated  notes,  and  all  others  which  by  law  are  required  to  be 
taken  up  and  not  reissued,  shall,  when  so  replaced,  or  taken 
up,  be  destroyed  in  such  manner  and  under  such  regulations  as 
the  Secretary  of  the  Treasury  may  prescribe. 

Act  of  July  n,  1862  —  To  authorize  an  additional  issue  of 
United  States  notes,  and  for  other  purposes 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is 
hereby  authorized  to  issue,  in  addition  to  the  amounts  hereto- 
fore authorized,  on  the  credit  of  the  United  States,  $150,000,000 
of  United  States  notes,  not  bearing  interest,  payable  to  bearer 
at  the  treasury  of  the  United  States,  and  of  such  denominations 
as  he  may  deem  expedient :  Provided,  that  no  note  shall  be 
issued  for  the  fractional  part  of  a  dollar,  and  not  more  than 
$35,000,000  shall  be  of  lower  denominations  than  $5  ;  and  such 
notes  shall  be  receivable  in  payment  of  all  loans  made  to  the 
United  States,  and  of  all  taxes,  internal  duties,  excises,  debts, 
and  demands  of  every  kind  due  to  the  United  States,  except 
duties  on  imports  and  interest,  and  of  all  claims  and  demands 
against  the  United  States,  except  for  interest  upon  bonds,  notes, 
and  certificates  of  debt  or  deposit ;  and  shall  also  be  lawful 
money  and  a  legal  tender  in  payment  of  all  debts,  public  and 
private,  within  the  United  States,  except  duties  on  imports  and 
interest,  as  aforesaid.  And  any  holder  of  said  United  States 
notes  depositing  any  sum  not  less  than  $50,  or  some  multiple 
of  $50,  with  the  Treasurer  of  the  United  States  or  either  of  the 
assistant  treasurers,  shall  receive  in  exchange  therefor  duplicate 
certificates  of  deposit,  one  of  which  may  be  transmitted  to  the 
Secretary  of  the  Treasury,  who  shall  thereupon  issue  to  the 
holder  an  equal  amount  of  bonds  of  the  United  States,  coupon 


504  CONTEST  FOR  SOUND  MONEY 

or  registered,  as  may  by  said  holder  be  desired,  bearing  inter- 
est at  the  rate  of  h  per  centum  per  annum,  payable  semi-annu- 
ally, and  redeemable  at  the  pleasure  of  the  United  States  after 

5  years,  and  payable  20  years  from  the  date  thereof:  Provided, 
however,  that  any  notes  issued  under  this  act  may  be  paid  in 
coin,  instead  of  being  received  in  exchange  for  certificates  of 
deposit  as  above  specified,  at  the  direction  of  the  Secretary  of 
the  Treasury.  And  the  Secretary  of  the  Treasury  may  exchange 
for  such  notes,  on  such  terms  as  he  shall  think  most  beneficial 
to  the  public  interest,  any  bonds  of  the  United  States  bearing 

6  per  centum  interest,  and  redeemable  after  5  and  payable  in 
20  years,  which  have  been  or  may  be  lawfully  issued  under  the 
provisions  of  any  existing  act ;  may  reissue  the  notes  so  received 
in  exchange  ;  may  receive  and  cancel  any  notes  heretofore  law- 
fully issued  under  any  act  of  Congress,  and  in  lieu  thereof, 
issue  an  equal  amount  in  notes  such  as  are  authorized  by  this 
act ;  and,  may  purchase,  at  rates  not  exceeding  that  of  the  cur- 
rent market,  and  cost  of  purchase  not  exceeding  one-eighth  of 
one  per  centum,  any  bonds  or  certificates  of  debt  of  the  United 
States  as  he  may  deem  advisable. 

[Sec.  2  relates  to  the  printing  and  engraving  of  United  States 
notes.] 

Sec.  3.  That  the  limitation  upon  temporary  deposits  of 
United  States  notes  with  any  assistant  treasurer,  or  designated 
depositary  authorized  by  the  Secretary  of  the -Treasury  to  receive 
such  deposits,  to  $50,000,000  be,  and  is  hereby,  repealed ;  and 
the  Secretary  of  the  Treasury  is  authorized  to  receive  such 
deposits,  under  such  regulations  as  he  may  prescribe,  to  such 
amount  as  he  may  deem  expedient,  not  exceeding  $100,000,000, 
for  not  less  than  30  days,  in  sums  not  less  than  $100,  at  a  rate 
of  interest  not  exceeding  5  per  centum  per  annum  ;  and  any 
amount  so  deposited  may  be  withdrawn  from  deposit,  at  any 
time  after  10  days'  notice  on  the  return  of  the  certificate  of 
deposit.  And  of  the  amount  of  United  States  notes  authorized 
by  this  act,  not  less  than  $50,000,000  shall  be  reserved  for  the 
purpose  of  securing  prompt  payment  of  such  deposits  when  de- 
manded, and  shall  be  issued  and  used  only  when,  in  the  judg- 
ment of  the  Secretary  of  the  Treasury,  the  same,  or  any  part 
thereof  may  be  needed  for  that  purpose.  And  certificates  of 
deposit  and  of  indebtedness  issued  under  this  or  former  acts, 
may  be  received  on  the  same  terms  as  United  States  notes  in 
payment  for  bonds  redeemable  after  5  and  payable  in  20 
years. 

[Sec.  4  relates  to  loans.] 

[Sec.  5  makes  appropriations  for  detecting  counterfeiting.] 


APPENDIX  505 


Act  of  July  17,  1862 —  To  authorize  payments  in  stamps,  and 
to  prohibit  circulation  of  notes  of  less  denomination  than 
one  dollar 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  be, 
and  he  is  hereby  directed  to  furnish  to  the  Assistant  Treasurers, 
and  such  designated  depositaries  of  the  United  States  as  may 
be  by  him  selected,  in  such  sums  as  he  may  deem  expedient, 
the  postage  and  other  stamps  of  the  United  States  to  be  ex- 
changed by  them,  on  application,  for  United  States  notes ;  and 
from  and  after  the  first  day  of  August  next,  such  stamps  shall 
be  receivable  in  payment  of  all  dues  to  the  United  States  less 
than  $5,  and  shall  be  received  in  exchange  for  United  States 
notes  when  presented  to  any  Assistant  Treasurer  or  any  desig- 
nated depositary  selected  as  aforesaid,  in  sums  not  less  than  $5. 

Sec.  2.  That  from  and  after  the  first  day  of  August*  1862, 
no  private  corporation,  banking  association,  firm,  or  individual, 
shall  make,  issue,  circulate,  or  pay  any  note,  check,  memoran- 
dum, token,  or  other  obligation,  for  a  less  sum  than  $1,  intended 
to  circulate  as  money  or  to  be  received  or  used  in  lieu  of  law- 
ful money  of  the  United  States  ;  and  every  person  so  offending 
shall,  on  conviction  thereof,  in  any  district  or  circuit  court  of 
the  United  States,  be  punished  by  fine  not  exceeding  $500,  or 
by  imprisonment  not  exceeding  six  months,  or  by  both,  at  the 
option  of  the  court. 


Joint  Resolution  of  January  17,  1863  —  To  provide  for  the  im- 
mediate payment  of  the  Army  and  Navy  of  the  United  States 

Whereas  it  is  deemed  expedient  to  make  immediate  provi- 
sion for  the  payment  of  the  army  and  navy ;  therefore,  Be  it 
resolved,  etc.,  That  the  Secretary  of  the  Treasury  be,  and  he  is 
hereby,  authorized,  if  required  by  the  exigencies  of  the  public 
service,  to  issue  on  the  credit  of  the  United  States  the  sum  of 
$100,000,000  of  United  States  notes,  in  such  form  as  he  may 
deem  expedient,  not  bearing  interest,  payable  to  bearer,  on 
demand,  and  of  such  denominations  not  less  than  $1,  as  he  may 
prescribe,  which  notes  so  issued  shall  be  lawful  money  and  a 
legal  tender,  like  the  similar  notes  heretofore  authorized  in  pay- 
ment of  all  debts,  public  and  private,  within  the  United  States, 
except  for  duties  on  imports  and  interest  on  the  public  debt ;  and 
the  notes  so  issued  shall  be  part  of  the  amount  provided  for  in 
any  bill  now  pending  for  the  issue  of  Treasury  notes,  or  that 
may  be  passed  hereafter  by  this  Congress. 


506  CONTEST  FOR  SOUND  MONEY 


Act  of  February  25,  1863  —  To  provide  a  national  currency, 
secured  by  a  pledge  of  United  States  stocks,  and  to  provide  for 
the  circulation  and  redemption  thereof 

[Note.  —  This  act  was  superseded  by  the  act  of  June  3,  1864,  the  pro- 
visions of  which  were  largely  the  same.  The  most  important  differences 
from  the  latter  were  the  following:] 


Sec.  17.  That  the  entire  amount  of  circulating  notes  to 
be  issued  under  this  act  shall  not  exceed  $300,000,000. 
$150,000,000  of  which  sum  shall  be  apportioned  to  associations 
in  the  States,  in  the  District  of  Columbia,  and  in  the  Territories, 
according  to  representative  population,  and  the  remainder  shall 
be  apportioned  by  the  Secretary  of  the  Treasury  among  asso- 
ciations formed  in  the  several  States,  in  the  District  of  Columbia, 
and  in  the  Territories,  having  due  regard  to  the  existing  bank- 
ing capital,  resources,  and  business,  of  such  States,  District,  and 
Territories. 

Sec.  62.  That  any  bank  or  banking  association,  authorized 
by  any  State  law  to  engage  in  the  business  of  banking,  and  duly 
organized  under  such  State  law  at  the  time  of  the  passage  of 
this  act,  and  which  shall  be  the  holder  and  owner  of  United 
States  bonds  to  the  amount  of  50  per  centum  of  its  capital 
stock,  may  transfer  and  deliver  to  the  Treasurer  of  the  United 
States  such  bonds,  or  any  part  thereof,  in  the  manner  provided 
by  this  act ;  and  upon  making  such  transfer  and  delivery,  such 
bank  or  banking  association  shall  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency,  circulating  notes,  as  herein  pro- 
vided, equal  in  amount  to  80  per  centum  of  the  amount  of  the 
bonds  so  transferred  and  delivered. 

Sec.  63.  That  upon  the  failure  of  any  such  State  bank  or 
banking  association,  to  redeem  any  of  its  circulating  notes  issued 
under  the  provisions  of  the  preceding  section,  the  Comptroller 
of  the  Currency  shall,  when  satisfied  that  such  default  has  been 
made,  and  within  thirty  days  after  notice  of  such  default,  pro- 
ceed to  declare  the  bonds  transferred  and  delivered  to  the 
treasurer,  forfeited  to  the  United  States,  and  the  same  shall 
thereupon  be  forfeited  accordingly.  And  thereupon  the  circu- 
lating notes  which  have  been  issued  by  such  bank  or  banking 
association  shall  be  redeemed  and  paid  at  the  treasury  of  the 
United  States  in  the  same  manner  as  other  circulating  notes 
issued  under  the  provisions  of  this  act  are  redeemed  and  paid. 

Sec.  64.   That  the  bonds  forfeited,  as  provided  in  the  last 


APPENDIX  507 

preceding  section,  may  be  cancelled  to  an  amount  equal  to  the 
circulating  notes  redeemed  and  paid,  or  such  bonds  may  be 
sold,  under  the  direction  of  the  Secretary  of  the  Treasury,  and 
after  retaining  out  of  the  proceeds  a  sum  sufficient  to  pay  the 
whole  amount  of  circulating  notes  for  the  redemption  of  which 
such  bonds  are  held,  the  surplus,  if  any  remains,  shall  be  paid 
to  the  bank  or  banking  association  from  which  such  bonds  were 
received. 


Act  of  March  3,  1863  —  To  provide  ways  and  means  for  the 
support  of  the  Government 

Be  it  enacted,  etc.  [Secretary  authorized  to  borrow  not  more 
than  $300,000,000  in  fiscal  year  1863,  and  $600,000,000  in 
fiscal  year  1864,  on  ten-forty  bonds  at  not  more  than  6  per  cent, 
interest.]  And  all  the  bonds  and  Treasury  notes  or  United 
States  notes  issued  under  the  provisions  of  this  act  shall  be 
exempt  from  taxation  by  or  under  State  or  municipal  authority  : 
Provided,  That  there  shall  be  outstanding  of  bonds,  treasury 
notes,  and  United  States  notes,  at  any  time,  issued  under  the 
provisions  of  this  act,  no  greater  amount  altogether  than  the 
sum  of  $900,000,000. 

Sec.  2.  That  the  Secretary  of  the  Treasury  be,  and  he  is 
hereby,  authorized  to  issue,  on  the  credit  of  the  United  States, 
$400,000,000  in  treasury  notes,  payable  at  the  pleasure  of  the 
United  States,  or  at  any  such  time  or  times  not  exceeding  three 
years  from  date,  as  may  be  found  most  beneficial  to  the  public 
interests,  and  bearing  interest  at  a  rate  not  exceeding  6  per 
centum  per  annum,  payable  at  periods  expressed  on  the  face 
of  said  treasury  notes  ;  and  the  interest  on  the  said  treas- 
ury notes  and  on  certificates  of  indebtedness  and  deposit  here- 
after issued,  shall  be  paid  in  lawful  money.  The  treasury  notes 
thus  issued  shall  be  of  such  denomination  as  the  Secretary  may 
direct,  not  less  than  $10,  and  may  be  disposed  of  on  the  best 
terms  that  can  be  obtained,  or  may  be  paid  to  any  creditor  of 
the  United  States  willing  to  receive  the  same  at  par.  And  said 
treasury  notes  may  be  made  a  legal  tender  to  the  same  extent  as 
United  States  notes,  for  their  face  value,  excluding  interest ;  or 
they  may  be  made  exchangeable  under  regulations  prescribed 
by  the  Secretary  of  the  Treasury,  by  the  holder  thereof,  at  the 
Treasury  in  the  City  of  Washington,  or  at  the  office  of  any 
assistant  treasurer  or  depositary  designated  for  that  purpose, 
for  United  States  notes  equal  in  amount  to  the  Treasury  notes 
offered  for  exchange,  together  with  the  interest  accrued  and  due 


508  CONTEST  FOR  SOUND  MONEY 

thereon  at  the  date  of  interest  payment  next  preceding  such 
exchange.  And  in  lieu  of  any  amount  of  said  treasury  notes 
thus  exchanged,  or  redeemed  or  paid  at  maturity,  the  Secretary 
may  issue  an  equal  amount  of  other  treasury  notes  ;  and  the 
treasury  notes  so  exchanged,  redeemed,  or  paid,  shall  be  can- 
celled and  destroyed  as  the  Secretary  may  direct.  In  order  to 
secure  certain  and  prompt  exchanges  of  United  States  notes  for 
Treasury  notes,  when  required,  as  above  provided,  the  Secretary 
shall  have  power  to  issue  United  States  notes  to  the  amount  of 
$150,000,000,  which  may  be  used  if  necessary  for  such  ex- 
changes ;  but  no  part  of  the  United  States  notes  authorized  by 
this  section  shall  be  issued  for  or  applied  to  any  other  purposes 
than  said  exchanges  ;  and  whenever  any  amount  shall  have  been 
so  issued  and  applied,  the  same  shall  be  replaced  as  soon  as  prac- 
ticable from  the  sales  of  Treasury  notes  for  United  States  notes. 

Sec.  3.  That  the  Secretary  of  the  Treasury  be,  and  he  is 
hereby,  authorized,  if  required  by  the  exigencies  of  the  public  ser- 
vice, for  the  payment  of  the  army  and  navy,  and  other  creditors 
of  the  Government,  to  issue  on  the  credit  of  the  United  States 
the  sum  of  $150,000,000  of  United  States  notes,  including  the 
amount  of  such  notes  heretofore  authorized  by  the  joint  reso- 
lution approved  January  17,  1863,  in  such  form  as  he  may  deem 
expedient,  not  bearing  interest,  payable  to  bearer,  and  of  such 
denominations,  not  less  than  $1,  as  he  may  prescribe,  which 
notes  so  issued  shall  be  lawful  money  and  a  legal  tender  in  pay- 
ment of  all  debts,  public  and  private,  within  the  United  States, 
except  for  duties  on  imports  and  interest  on  the  public  debt ; 
and  any  of  the  said  notes,  when  returned  to  the  treasury,  may 
be  reissued  from  time  to  time  as  the  exigencies  of  the  public 
service  may  require.  And  in  lieu  of  any  of  said  notes,  or  any 
other  United  States  notes,  returned  to  the  treasury,  and  cancelled 
or  destroyed,  there  may  be  issued  equal  amounts  of  United 
States  notes,  such  as  are  authorized  by  this  act.  And  so  much 
of  the  act  to  authorize  the  issue  of  United  States  notes,  and  for 
other  purposes,  approved  February  25,  1862,  and  of  the  act  to 
authorize  an  additional  issue  of  United  States  notes,  and  for 
other  purposes,  approved  July  n,  1862,  as  restricts  the  nego- 
tiation of  bonds  to  market  value,  is  hereby  repealed.  And  the 
holders  of  United  States  notes,  issued  under  and  by  virtue  of 
said  acts,  shall  present  the  same  for  the  purpose  of  exchanging 
the  same  for  bonds,  as  therein  provided,  on  or  before  the  first 
day  of  July,  1863,  and  thereafter  the  right  so  to  exchange  the 
same  shall  cease  and  determine. 

Sec.  4.  That  in  lieu  of  postage  and  revenue  stamps  for  frac- 
tional currency,  and  of  fractional  notes,  commonly  called  postage 


APPENDIX  509 

currency,  issued  or  to  be  issued,  the  Secretary  of  the  Treasury 
may  issue  fractional  notes  of  like  amounts  in  such  form  as  he 
may  deem  expedient,  and  may  provide  for  the  engraving, 
preparation,  and  issue  thereof  in  the  treasury  department  build- 
ing. And  all  such  notes  issued  shall  be  exchangeable  by  the 
assistant-treasurers  and  designated  depositaries  for  United 
States  notes,  in  sums  not  less  than  $3,  and  shall  be  receivable 
for  postage  and  revenue  stamps,  and  also  in  payment  of  any 
dues  to  the  United  States  less  than  $5,  except  duties  on  im- 
ports, and  shall  be  redeemed  on  presentation  at  the  treasury  of 
the  United  States  in  such  sums  and  under  such  regulations  as  the 
Secretary  of  the  Treasury  shall  prescribe :  Provided,  That 
the  whole  amount  of  fractional  currency  issued,  including  post- 
age and  revenue  stamps  issued  as  currency,  shall  not  exceed 
$50,000,000. 

Sec.  5.  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized to  receive  deposits  of  gold  coin  and  bullion  with  the 
treasurer  or  any  assistant-treasurer  of  the  United  States,  in  sums 
not  less  than  $20,  and  to  issue  certificates  therefor,  in  denomi- 
nations of  not  less  than  $20  each,  corresponding  with  the 
denominations  of  the  United  States  notes.  The  coin  and  bull- 
ion deposited  for  or  representing  the  certificates  of  deposit 
shall  be  retained  in  the  treasury  for  the  payment  of  the  same  on 
demand.  And  certificates  representing  coin  in  the  treasury 
may  be  issued  in  payment  of  interest  on  the  public  debt,  which 
certificates,  together  with  those  issued  for  coin  and  bullion 
deposited,  shall  not  at  any  time  exceed  20  per  centum  beyond 
the  amount  of  coin  and  bullion  in  the  treasury  ;  and  the  cer- 
tificates for  coin  or  bullion  in  the  Treasury  shall  be  received  at 
par  in  payments  for  duties  on  imports. 

[Sec.  6.  Form  of  bond  and  notes  ;  signatures,  etc.] 
Sec.  7.  That  all  banks,  associations,  corporations,  or  indi- 
viduals, issuing  notes  or  bills  for  circulation  as  currency,  shall 
be  subject  to  and  pay  a  duty  of  1  per  centum  each  half  year 
from  and  after  April  1,  1863,  upon  the  average  amount  of  cir- 
culation of  notes  or  bills  as  currency  issued  beyond  the  amount 
hereinafter  named,  that  is  to  say  :  banks,  associations,  corpora- 
tions, or  individuals,  having  a  capital  of  not  over  $100,000, 
ninety  per  centum  thereof;  over  $100,000  and  not  over 
$200,000,  eighty  per  centum  thereof;  over  $200,000  and  not 
over  $300,000,  seventy  per  centum  thereof;  over  $300,000  and 
not  over  $500,000,  sixty  per  centum  thereof;  over  $500,000 
and  not  over  $1,000,000,  fifty  per  centum  thereof;  over 
$1,000,000  and  not  over  $1,500,000,  forty  per  centum  thereof; 
over  $1,500,000  and  not  over  $2,000,000,  thirty  per  centum 


510  CONTEST  FOR  SOUND  MONEY 

thereof;  over  $2,000,000,  twenty-five  per  centum  thereof.  In 
the  case  of  banks  with  branches,  the  duty  herein  provided  for 
shall  be  imposed  upon  the  circulation  of  the  notes  or  bills  of 
such  branches  severally,  and  not  upon  the  aggregate  circulation 
of  all ;  and  the  amount  of  capital  of  each  branch  shall  be  con- 
sidered to  be  the  amount  allotted  to  or  used  by  such  branch ; 
and  all  such  banks,  associations,  corporations,  and  individuals 
shall  also  be  subject  to  and  pay  a  duty  of  one  half  of  one  per 
centum  each  half  year  from  and  after  April  1,  1863,  upon  the 
average  amount  of  notes  or  bills  not  otherwise  herein  taxed  and 
outstanding  as  currency  during  the  six  months  next  preceding 
the  return  hereinafter  provided  for ;  and  the  rates  of  tax  or  duty 
imposed  on  the  circulation  of  associations  which  may  be  organ- 
ized under  the  act  "  to  provide  a  national  currency,  secured  by 
a  pledge  of  United  States  stocks,  and  to  provide  for  the  cir- 
culation and  redemption  thereof,"  approved  Feb.  25,  1863, 
shall  be  t the  same  as  that  hereby  imposed  on  the  circulation 
and  deposits  of  all  banks,  associations,  corporations,  or  indi- 
viduals, but  shall  be  assessed  and  collected  as  required  by  said 
act ;  all  banks,  associations,  or  corporations,  and  individuals 
issuing  or  reissuing  notes  or  bills  for  circulation  as  currency 
after  April  1,  1863,  in  sums  representing  any  fractional  part  of 
a  dollar,  shall  be  subject  to  and  pay  a  duty  of  five  per  centum 
each  half  year  thereafter  upon  the  amount  of  such  fractional 
notes  or  bills  so  issued.  And  all  banks,  associations,  corpora- 
tions, and  individuals  receiving  deposits  of  money  subject  to 
payment  on  check  or  draft,  except  savings  institutions,  shall  be 
subject  to  a  duty  of  one-eighth  of  one  per  centum  each  half 
year  from  and  after  April  1,  1863,  upon  the  average  amount  of 
such  deposits  beyond  the  average  amount  of  their  circulating 
notes  or  bills  lawfully  issued  and  outstanding  as  currency. 

[The  remainder  of  the  section  provides  for  forms  of  reports 
and  for  penalties  for  non-compliance  with  the  law.] 


Act  of  June  3,  1864 —  To  provide  a  national  currency,  secured 
by  a  pledge  of  United  States  bonds,  and  to  provide  for  the 
circulation  and  redemption  thereof 

Be  it  enacted,  etc.,  That  there  shall  be  established  in  the 
Treasury  Department  a  separate  Bureau,  which  shall  be  charged 
with  the  execution  of  this  and  all  other  laws  that  may  be 
passed  by  Congress  respecting  the  issue  and  regulation  of  a 
national  currency  secured  by  United  States  bonds.     The  chief 


APPENDIX  .  511 

officer  of  the  said  Bureau  shall  be  denominated  the  Comp- 
troller of  the  Currency,  and  shall  be  under  the  general  direction 
of  the  Secretary  of  the  Treasury.  He  shall  be  appointed  by 
the  President,  on  the  recommendation  of  the  Secretary  of  the 
Treasury,  by  and  with  the  advice  and  consent  of  the  Senate, 
and  shall  hold  his  office  for  the  term  of  5  years  unless  sooner 
removed  by  the  President,  upon  reasons  to  be  communicated 
by  him  to  the  Senate ;  he  shall  receive  an  annual  salary  of  five 
thousand  dollars ;  he  shall  have  a  competent  deputy,  appointed 
by  the  Secretary,  whose  salary  shall  be  $2,500,*  and  who  shall 
possess  the  power  and  perform  the  duties  attached  by  law  to 
the  office  of  Comptroller  during  a  vacancy  in  such  office  and 
during  his  absence  or  inability  ;  he  shall  employ,  from  time  to 
time,  the  necessary  clerks  to  discharge  such  duties  as  he  shall 
direct,  which  clerks  shall  be  appointed  and  classified  by  the 
Secretary  of  the  Treasury  in  the  manner  now  provided  by  law. 
Within  15  days  from  the  time  of  notice  of  his  appointment 
the  Comptroller  shall  take  and  subscribe  the  oath  of  office 
prescribed  by  the  Constitution  and  laws  of  the  United  States  ; 
and  he  shall  give  to  the  United  States  a  bond  in  the  penalty  of 
$100,000,  with  not  less  than  two  responsible  sureties,  to  be 
approved  by  the  Secretary  of  the  Treasury,  conditioned  for  the 
faithful  discharge  of  the  duties  of  his  office.  The  deputy 
comptroller  so  appointed  shall  also  take  the  oath  of  office 
prescribed  by  the  Constitution  and  laws  of  the  United  States, 
and  shall  give  a  like  bond  in  the  penalty  of  $50,000.  The 
Comptroller  and  deputy-comptroller  shaU  not,  either  directly 
or  indirectly,  be  interested  in  any  association  issuing  national 
currency  under  the  provisions  of  this  act. 

"Sec.  2  provides  for  a  seal  of  office.] 

"Sec.  3  provides  for  rooms  for  office  in  Treasury  building.] 

Sec.  4.  That  the  term  "  United  States  bonds,"  as  used  in 
this  act,  shall  be  construed  to  mean  all  registered  bonds  now 
issued,  or  that  may  hereafter  be  issued,  on  the  faith  of  the  United 
States  by  the  Secretary  of  the  Treasury  in  pursuance  of  law. 

Sec.  5.  That  associations  for  carrying  on  the  business  of 
banking  may  be  formed  by  any  number  of  persons,  not  less  in 
any  case  than  5,  who  shall  enter  into  articles  of  association, 
which  shall  specify  in  general  terms  the  object  for  which  the 
association  is  formed,  and  may  contain  any  other  provisions, 
not  inconsistent  with  the  provisions  of  this  act,  which  the 
association  may  see  fit  to  adopt  for  the  regulation  of  the  busi- 
ness  of  the  association  and  the  conduct  of  its  affairs,  which 

1  Subsequently  increased  to  52,800. 


512  CONTEST  FOR  SOUND  MONEY 

said  articles  shall  be  signed  by  the  persons  uniting  to  form  the 
association,  and  a  copy  of  them  forwarded  to  the  Comptroller 
of  the  Currency,  to  be  filed  and  preserved  in  his  office. 

Sec.  6.  That  the  persons  uniting  to  form  such  an  association 
shall,  under  their  hands,  make  an  organization  certificate, 
which  shall  specify  — 

I.  The  name  assumed  by  such  association,  which  name 
shall  be  subject  to  the  approval  of  the  Comptroller. 

II.  The  place  where  its  operations  of  discount  and  deposit 
are  to  be  carried  on,  designating  the  State,  Territory,  or  Dis- 
trict, and  also  the  particular  county  and  city,  town,  or  village. 

III.  The  amount  of  its  capital  stock,  and  the  number  of 
shares  into  which  the  same  shall  be  divided. 

IV.  The  names  and  places  of  residence  of  the  shareholders, 
and  the  number  of  shares  held  by  each  of  them. 

V.  A  declaration  that  said  certificate  is  made  to  enable  such 
persons  to  avail  themselves  of  the  advantages  of  this  act. 

The  said  certificate  shall  be  acknowledged  before  a  judge  of 
some  court  of  record  or  a  notary  public,  and  such  certificate, 
with  the  acknowledgment  thereof  authenticated  by  the  seal  of 
such  court  or  notary,  shall  be  transmitted  to  the  Comptroller 
of  the  Currency,  who  shall  record  and  carefully  preserve  the 
same  in  his  office.  Copies  of  such  certificate,  duly  certified  by 
the  Comptroller,  and  authenticated  by  his  seal  of  office,  shall 
be  legal  and  sufficient  evidence  in  all  courts  and  places  within 
the  United  States,  or  the  jurisdiction  of  the  Government 
thereof,  of  the  existence  of  such  association,  and  of  every 
other  matter  or  thing  which  could  be  proved  by  the  production 
of  the  original  certificate. 

Sec.  7.  That  no  association  shall  be  organized  under  this 
act,  with  a  less  capital  than  $100,000,  nor  in  a  city  whose 
population  exceeds  50,000  persons,  with  a  less  capital  than 
$200,000  :  Provided,  That  banks  with  a  capital  of  not  less  than 
$50,000  may,  with  the  approval  of  the  Secretary  of  the  Treasury, 
be  organized  in  any  place  the  population  of  which  does  not 
exceed  6000  inhabitants.     [Amended  March  14,  1900.] 

Sec.  8.  That  every  association  formed  pursuant  to  the  pro- 
visions of  this  act  shall,  from  the  date  of  the  execution  of  its 
organization  certificate,  be  a  body  corporate,  but  shall  transact 
no  business  except  such  as  may  be  incidental  to  its  organiza- 
tion and  necessarily  preliminary,  until  authorized  by  the  Comp- 
troller of  the  Currency  to  commence  the  business  of  banking. 
Such  association  shall  have  power  to  adopt  a  corporate  seal, 
and  shall  have  succession  by  the  name  designated  in  its  organi- 
zation certificate,  for  the  period  of  20  years  from  its  organiza- 


APPENDIX  513 

tion,  unless  sooner  dissolved  according  to  the  provisions  of  its 
articles  of  association,  or  by  the  act  of  its  shareholders  owning 
two  thirds  of  its  stock,  or  unless  the  franchise  shall  be  forfeited 
by  a  violation  of  this  act ;  by  such  name  it  may  make  contracts, 
sue  and  be  sued,  complain  and  defend,  in  any  court  of  law  and 
equity  as  fully  as  natural  persons ;  it  may  elect  or  appoint 
directors,  and  by  its  board  of  directors  appoint  a  president, 
vice-president,  cashier,  and  other  officers,  define  their  duties, 
require  bonds  of  them  and  fix  the  penalty  thereof,  dismiss  said 
officers  or  any  of  them  at  pleasure,  and  appoint  others  to  fill 
their  places,  and  exercise  under  this  act  all  such  incidental 
powers  as  shall  be  necessary  to  carry  on  the  business  of  bank- 
ing by  discounting  and  negotiating  promissory  notes,  drafts, 
bills  of  exchange,  and  other  evidences  of  debt ;  by  receiving 
deposits ;  by  buying  and  selling  exchange,  coin,  and  bullion ; 
by  loaning  money  on  personal  security  ;  by  obtaining,  issuing, 
and  circulating  notes  according  to  the  provisions  of  this  act ; 
and  its  board  of  directors  shall  also  have  power  to  define  and 
regulate  by  by-laws,  not  inconsistent  with  the  provisions  of  this 
act,  the  manner  in  which  its  stock  shall  be  transferred,  its 
directors  elected  or  appointed,  its  officers  appointed,  its  prop- 
erty transferred,  its  general  business  conducted,  and  all  the 
privileges  granted  by  this  act  to  associations  organized  under  it 
shall  be  exercised  and  enjoyed  ;  and  its  usual  business  shall  be 
transacted  at  an  office  or  banking  house  located  in  the  place 
specified  in  its  organization  certificate. 

Sec.  9.  That  the  affairs  of  every  association  shall  be  man- 
aged by  not  less  than  5  directors,  one  of  whom  shall  be  the 
president.  Every  director  shall,  during  his  whole  term  of  ser- 
vice, be  a  citizen  of  the  United  States  ;  and  at  least  three  fourths 
of  the  directors  shall  have  resided  in  the  State,  Territory,  or 
District  in  which  such  association  is  located  one  year  next  pre- 
ceding their  election  as  directors,  and  be  residents  of  the  same 
during  their  continuance  in  office.  Each  director  shall  own, 
in  his  own  right,  at  least  ten  shares  of  the  capital  stock  of  the 
association  of  which  he  is  a  director.  Each  director,  when 
appointed  or  elected,  shall  take  an  oath  that  he  will,  so  far  as 
the  duty  devolves  on  him,  diligently  and  honestly  administer 
the  affairs  of  such  association,  and  will  not  knowingly  violate,  or 
willingly  permit  to  be  violated,  any  of  the  provisions  of  this  act, 
and  that  he  is  the  bona  fide  owner,  in  his  own  right,  of  the 
number  of  shares  of  stock  required  by  this  act,  subscribed  by 
him,  or  standing  in  his  name  on  the  books  of  the  association, 
and  that  the  same  is  not  hypothecated,  or  in  any  way  pledged, 
as  security  for  any  loan  or  debt ;  which  oath,  subscribed  by 


514  CONTEST  FOR  SOUND  MONEY 

himself,  and  certified  by  the  officer  before  whom  it  is  taken, 
shall  be  immediately  transmitted  to  the  Comptroller  of  the 
Currency,  and  by  him  filed  and  preserved  in  his  office. 

Sec.  io.  That  the  directors  of  any  association  first  elected 
or  appointed  shall  hold  their  places  until  their  successors  shall 
be  elected  and  qualified.  All  subsequent  elections  shall  be 
held  annually  on  such  day  in  the  month  of  January  as  may  be 
specified  in  the  articles  of  association ;  and  the  directors  so 
elected  shall  hold  their  places  for  one  year,  and  until  their  suc- 
cessors are  elected  and  qualified.  But  any  director  ceasing  to 
be  the  owner  of  the  requisite  amount  of  stock,  or  having  in  any 
other  manner  become  disqualified,  shall  thereby  vacate  his  place. 
Any  vacancy  in  the  board  shall  be  filled  by  appointment  by  the 
remaining  directors,  and  any  director  so  appointed  shall  hold 
his  place  until  the  next  election.  If  from  any  cause  an  election 
of  directors  shall  not  be  made  at  the  time  appointed,  the  asso- 
ciation shall  not  for  that  cause  be  dissolved,  but  an  election 
may  be  held  on  any  subsequent  day,  30  days'  notice  thereof  in 
all  cases  having  been  given  in  a  newspaper  published  in  the 
city,  town,  or  county  in  which  the  association  is  located ;  and 
if  no  newspaper  is  published  in  such  city,  town,  or  county,  such 
notice  shall  be  published  in  a  newspaper  published  nearest 
thereto.  If  the  articles  of  association  do  not  fix  the  day  on 
which  the  election  shall  be  held,  or  if  the  election  should  not 
be  held  on  the  day  fixed,  the  day  for  the  election  shall  be  des- 
ignated by  the  board  of  directors  in  their  by-laws,  or  otherwise  : 
Provided,  That  if  the  directors  fail  to  fix  the  day,  as  aforesaid, 
shareholders  representing  two  thirds  of  the  shares  may. 

Sec.  11.  That  in  all  elections  of  directors,  and  in  deciding 
all  questions  at  meetings  of  shareholders,  each  shareholder  shall 
be  entitled  to  one  vote  on  each  share  of  stock  held  by  him. 
Shareholders  may  vote  by  proxies  duly  authorized  in  writing ; 
but  no  officer,  clerk,  teller,  or  book-keeper  of  such  association 
shall  act  as  proxy ;  and  no  shareholder  whose  liability  is  past 
due  and  unpaid  shall  be  allowed  to  vote. 

Sec.  12.  That  the  capital  stock  of  any  association  formed 
under  this  act  shall  be  divided  into  shares  of  $100  each,  and  be 
deemed  personal  property  and  transferable  on  the  books  of  the 
association  in  such  manner  as  may  be  prescribed  in  the  by-laws 
or  articles  of  association  ;  and  every  person  becoming  a  share- 
holder by  such  transfer  shall,  in  proportion  to  his  shares,  suc- 
ceed to  all  the  rights  and  liabilities  of  the  prior  holder  of  such 
shares,  and  no  change  shall  be  made  in  the  articles  of  associa- 
tion by  which  the  rights,  remedies,  or  security  of  the  existing 
creditors  of  the  association  shall  be  impaired.    The  shareholders 


APPENDIX  .515 

of  each  association  formed  under  the  provisions  of  this  act,  and 
of  each  existing  bank  or  banking  association  that  may  accept 
the  provisions  of  this  act,  shall  be  held  individually  responsible, 
equally  and  ratably,  and  not  one  for  another,  for  all  contracts, 
debts,  and  engagements  of  such  association  to  the  extent  of  the 
amount  of  their  stock  therein  at  the  par  value  thereof,  in  addi- 
tion to  the  amount  invested  in  such  shares ;  except  that  share- 
holders of  any  banking  association  now  existing  under  State 
laws,  having  not  less  than  $5,000,000  of  capital  actually  paid 
in,  and  a  surplus  of  20  per  centum  on  hand,  both  to  be  deter- 
mined by  the  Comptroller  of  the  Currency,  shall  be  liable  only 
to  the  amount  invested  in  their  shares ;  and  such  surplus  of  20 
per  centum  shall  be  kept  undiminished,  and  be  in  addition  to 
the  surplus  provided  for  in  this  act ;  and  if  at  any  time  there 
shall  be  a  deficiency  in  said  surplus  of  20  per  centum,  the  said 
banking  association  shall  not  pay  any  dividends  to  its  share- 
holders until  such  deficiency  shall  be  made  good  :  and  in  case 
of  such  deficiency,  the  Comptroller  of  the  Currency  may  com- 
pel said  banking  association  to  close  its  business  and  wind  up 
its  affairs  under  the  provisions  of  this  act.  And  the  Comptroller 
shall  have  authority  to  withhold  from  an  association  his  certifi- 
cate authorizing  the  commencement  of  business,  whenever  he 
shall  have  reason  to  suppose  that  the  shareholders  thereof  have 
formed  the  same  for  any  other  than  the  legitimate  objects 
contemplated  by  this  act. 

Sec.  13.  That  it  shall  be  lawful  for  any  association  formed 
under  this  act,  by  its  articles  of  association,  to  provide  for  an 
increase  of  its  capital  from  time  to  time,  as  may  be  deemed 
expedient,  subject  to  the  limitations  of  this  act :  Provided,  That 
the  maximum  of  such  increase  in  the  articles  of  association  shall 
be  determined  by  the  Comptroller  of  the  Currency  ;  and  no 
increase  of  capital  shall  be  valid  until  the  whole  amount  of  such 
increase  shall  be  paid  in,  and  notice  thereof  shall  have  been  trans- 
mitted to  the  Comptroller  of  the  Currency,  and  his  certificate 
obtained  specifying  the  amount  of  such  increase  of  capital  stock, 
with  his  approval  thereof,  and  that  it  has  been  duly  paid  in  as  part 
of  the  capital  of  such  association.1  And  every  association  shall 
have  power,  by  the  vote  of  shareholders  owning  two  thirds  of  its 
capital  stock,  to  reduce  the  capital  of  such  association  to  any  sum 
not  below  the  amount  required  by  this  act,  in  the  formation  of 
associations  :  Provided,  That  by  no  such  reduction  shall  its  capi- 

1  Sec.  1  of  the  Act  of  May  I,  1886,  amended  the  provision  of  this 
section  to  permit  an  increase  of  capital  to  any  amount  by  a  vote  of  two 
thirds  of  the  stockholders  and  upon  the  approval  of  the  Comptroller,  re- 
gardless of  the  limit  fixed  in  the  original  articles  of  association. 


$l6  CO  ATTEST  FOR  SOUND  MONEY 

tal  be  brought  below  the  amount  required  by  this  act  for  its  out- 
standing circulation,  nor  shall  any  such  reduction  be  made  until 
the  amount  of  the  proposed  reduction  has  been  reported  to  the 
Comptroller  of  the  Currency  and  his  approval  thereof  obtained. 

Sec.  14.  That  at  least  50  per  centum  of  the  capital  stock  of 
every  association  shall  be  paid  in  before  it  shall  be  authorized 
to  commence  business ;  and  the  remainder  of  the  capital  stock 
of  such  association  shall  be  paid  in  instalments  of  at  least  10 
per  centum  each  on  the  whole  amount  of  the  capital  as  fre- 
quently as  one  instalment  at  the  end  of  each  succeeding  month 
from  the  time  it  shall  be  authorized  by  the  Comptroller  to  com- 
mence business ;  and  the  payment  of  each  instalment  shall  be 
certified  to  the  Comptroller,  under  oath,  by  the  president  or 
cashier  of  the  association. 

Sec.  15.  That  if  any  shareholder  or  his  assignee,  shall  fail  to 
pay  any  instalment  on  the  stock  when  the  same  is  required  by 
the  foregoing  section  to  be  paid,  the  directors  of  such  associa- 
tion may  sell  the  stock  of  such  delinquent  shareholder  at  public 
auction,  having  given  three  weeks'  previous  notice  thereof  in  a 
newspaper  published  and  of  general  circulation  in  the  city  or 
county  where  the  association  is  located,  and  if  no  newspaper  is 
published  in  said  city  or  county,  then  in  a  newspaper  published 
nearest  thereto,  to  any  person  who  will  pay  the  highest  price 
therefor,  and  not  less  than  the  amount  then  due  thereon,  with 
the  expenses  of  advertisement  and  sale  ;  and  the  excess,  if  any, 
•shall  be  paid  to  the  delinquent  shareholder.  If  no  bidder  can 
be  found  who  will  pay  for  such  stock  the  amount  due  thereon 
to  the  association,  and  the  cost  of  advertisement  and  sale,  the 
amount  previously  paid  shall  be  forfeited  to  the  association,  and 
such  stock  shall  be  sold  as  the  directors  may  order,  within  6 
months  from  the  time  of  such  forfeiture,  and  if  not  sold  it  shall 
be  cancelled  and  deducted  from  the  capital  stock  of  the  associa- 
tion ;  and  if  such  cancellation  and  reduction  shall  reduce  the 
capital  of  the  association  below  the  minimum  of  capital  required 
by  this  act,  the  capital  stock  shall,  within  30  days  from  the 
date  of  such  cancellation,  be  increased  to  the  requirements  of 
the  act ;  in  default  of  which  a  receiver  may  be  appointed  to 
close  up  the  business  of  the  association  according  to  the  pro- 
visions of  the  50th  section  of  this  act. 

Sec.  16.  That  every  association,  after  having  complied  with 
the  provisions  of  this  act,  preliminary  to  the  commencement  of 
banking  business  under  its  provisions,  and  before  it  shall  be 
authorized  to  commence  business,  shall  transfer  and  deliver  to 
the  Treasurer  of  the  United  States  any  United  States  registered 
bonds  bearing  interest  to  an  amount  not  less  than  $30,000  nor 


APPENDIX  517 

less  than  one  third  of  the  capital  stock  paid  in,  which  bonds 
shall  be  deposited  with  the  Treasurer  of  the  United  States  and 
by  him  safely  kept  in  his  office  until  the  same  shall  be  other- 
wise disposed  of,  in  pursuance  of  the  provisions  of  this  act ; 
and  the  Secretary  of  the  Treasury  is  hereby  authorized  to 
receive  and  cancel  any  United  States  coupon  bonds,  and  to 
issue  in  lieu  thereof  registered  bonds  of  like  amount,  bearing 
a  like  rate  of  interest,  and  having  the  same  time  to  run ;  and 
the  deposit  of  bonds  shall  be,  by  every  association,  increased 
as  its  capital  may  be  paid  up  or  increased,  so  that  every  associ- 
ation shall  at  all  times  have  on  deposit  with  the  Treasurer 
registered  United  States  bonds  to  the  amount  of  at  least  one 
third  of  its  capital  stock  actually  paid  in  :  Provided,  That 
nothing  in  this  section  shall  prevent  an  association  that  may 
desire  to  reduce  its  capital  or  to  close  up  its  business  and  dis- 
solve its  organization  from  taking  up  its  bonds  upon  returning 
to  the  Comptroller  its  circulating  notes  in  the  proportion  here- 
inafter named  in  this  act,  nor  from  taking  up  any  excess  of 
bonds  beyond  one  third  of  its  capital  stock  and  upon  which  no 
circulating  notes  have  been  delivered.1 

Sec.  17.  That  whenever  a  certificate  shall  have  been  trans- 
mitted to  the  Comptroller  of  the  Currency,  as  provided  in  this 
act,  and  the  association  transmitting  the  same  shall  notify  the 
Comptroller  that  at  least  50  per  centum  of  its  capital  stock 
has  been  paid  in  as  aforesaid,  and  that  such  association  has 
complied  with  all  the  provisions  of  this  act  as  required  to  be 
complied  with  before  such  association  shall  be  authorized  to 
commence  the  business  of  banking,  the  Comptroller  shall  ex- 
amine into  the  condition  of  such  association,  ascertain  espe- 
cially the  amount  of  money  paid  in  on  account  of  its  capital, 
the  name  and  place  of  residence  of  each  of  the  directors  of 
such  association,  and  the  amount  of  the  capital  stock  of  which 
each  is  the  bona  fide  owner,  and  generally  whether  such  associ- 
ation has  complied  with  all  the  requirements  of  this  act  to 
entitle  it  to  engage  in  the  business  of  banking ;  and  shall 
cause  to  be  made  and  attested  by  the  oaths  of  a  majority  of 
the  directors  and  by  the  president  or  cashier  of  such  associa- 
tion, a  statement  of  all  the  facts  necessary  to  enable  the  Comp- 
troller to  determine  whether  such  association  is  lawfully 
entitled  to  commence  the  business  of  banking  under  this  act. 

Sec.  18.  That  if,  upon  a  careful  examination  of  the  facts  so 
reported,  and  of  any  other  facts  which  may  come  to  the  knowl- 
edge of  the  Comptroller,  whether  by  means  of  a  special  com- 

1Amended  by  Acts  of  June  20, 1874,  July  12,  1882,  and  March  14,  1900. 


518  CONTEST  FOR  SOUND  MONEY 

mission  appointed  by  him  for  the  purpose  of  inquiring  into 
the  condition  of  such  association,  or  otherwise,  it. shall  appear 
that  such  association  is  lawfully  entitled  to  commence  the  busi- 
ness of  banking,  the  Comptroller  shall  give  to  such  association 
a  certificate,  under  his  hand  and  official  seal,  that  such  associa- 
tion has  complied  with  all  the  provisions  of  this  act  required 
to  be  complied  with  before  being  entitled  to  commence  the 
business  of  banking  under  it,  and  that  such  association  is 
authorized  to  commence  said  business  accordingly;  and  it 
shall  be  the  duty  of  the  association  to  cause  said  certificate  to 
be  published  in  some  newspaper  published  in  the  city  or 
county  where  the  association  is  located  for  at  least  60  days 
next  after  the  issuing  thereof :  Provided,  That  if  no  newspaper  is 
published  in  such  city  or  county  the  certificate  shall  be  pub- 
lished in  a  newspaper  published  nearest  thereto. 

[Secs.  19  and  20  provide  for  method  of  transferring  and 
recording  bonds.] 

Sec.  21.  That  upon  the  transfer  and  delivery  of  bonds  to 
the  Treasurer,  as  provided  in  the  foregoing  section,  the  associa- 
tion making  the  same  shall  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency  circulating  notes  of  different  de- 
nominations, in  blank,  registered,  and  countersigned  as  here- 
inafter provided,  equal  in  amount  to  90  per  centum  of  the 
current  market  value  of  the  United  States  bonds  so  transferred 
and  delivered,  but  not  exceeding  90  per  centum  of  the  amount 
of  said  bonds  at  the  par  value  thereof,  if  bearing  interest  at  a 
rate  not  less  than  5  per  centum  per  annum  ' ;  and  at  no  time 
shall  the  total  amounts  of  such  notes,  issued  to  any  such  asso- 
ciation, exceed  the  amount  at  such  time  actually  paid  in  of  its 
capital  stock. 

Sec.  22.  That  the  entire  amount  of  notes  for  circulation  to 
be  issued  under  this  act  shall  not  exceed  $300,000,000. 2  In 
order  to  furnish  suitable  notes  for  circulation,  the  Comptroller 
of  the  Currency  is  hereby  authorized  and  required,  under  the 
direction  of  the  Secretary  of  the  Treasury,  to  cause  plates  and 
dies  to  be  engraved,  in  the  best  manner  to  guard  against  coun- 
terfeiting and  fraudulent  alterations,  and  to  have  printed  there- 
from, and  numbered,  such  quantity  of  circulating  notes,  in 
blank,  of  the  denominations  of  $1,  $2,  $3,  $5,  $10,  $20,  $50, 
$100,  $500,  and  $1000,  as  may  be  required  to  supply,  under 
this  act,  the  associations  entitled  to  receive  the  same ;  which 
notes  shall  express  upon  their  face  that  they  are  secured  by 

1  Amended  by  Acts  of  July  12,  1882,  and  March  14,  1900. 

2  See  Acts  of  March  3,  1865,  July  12,  1870,  June  20,  1874,  and  January 
14,  1875. 


APPENDIX  519 

United  States  bonds,  deposited  with  the  Treasurer  of  the 
United  States  by  the  written  or  engraved  signatures  of 
the  Treasurer  and  Register,  and  by  the  imprint  of  the  seal  of  the 
Treasury ;  and  shall  also  express  upon  their  face  the  promise 
of  the  association  receiving  the  same  to  pay  on  demand, 
attested  by  the  signatures  of  the  president  or  vice-president 
and  cashier.  And  the  said  notes  shall  bear  such  devices  and 
such  other  statements,  and  shall  be  in  such  form,  as  the  Secre- 
tary of  the  Treasury  shall,  by  regulation,  direct :  Provided, 
That  not  more  than  one  sixth  part  of  the  notes  furnished  to  an 
association  shall  be  of  a  less  denomination  than  $5,  and  that 
after  specie  payments  shall  be  resumed  no  association  shall  be 
furnished  with  notes  of  less  denomination  than  $5.  [Amended 
by  Act  of  March  14,  1900.] 

Sec.  23.  That  after  any  such  association  shall  have  caused 
its  promise  to  pay  such  notes  on  demand  to  be  signed  by  the 
president  or  vice-president  and  cashier  thereof,  in  such  manner 
as  to  make  them  obligatory  promissory  notes,  payable  on  de- 
mand, at  its  place  of  business,  such  association  is  hereby  author- 
ized to  issue  and  circulate  the  same  as  money ;  and  the  same 
shall  be  received  at  par  in  all  parts  of  the  United  States  in  pay- 
ment of  taxes,  excises,  public  lands,  and  all  other  dues  to  the 
United  States,  except  for  duties  on  imports ;  and  also  for  all 
salaries  and  other  debts  and  demands  owing  by  the  United 
States  to  individuals,  corporations,  and  associations  within  the 
United  States,  except  interest  on  the  public  debt,  and  in  redemp- 
tion of  the  national  currency.  And  no  such  association  shall 
issue  post  notes  or  any  other  notes  to  circulate  as  money  than 
such  as  are  authorized  by  the  foregoing  provisions  of  this  act. 

Sec.  24.  That  it  shall  be  the  duty  of  the  Comptroller  of  the 
Currency  to  receive  worn-out  or  mutilated  circulating  notes 
issued  by  any  such  banking  association,  and  also,  on  due  proof 
of  the  destruction  of  any  such  circulating  notes,  to  deliver  in 
place  thereof  to  such  association  other  blank  circulating  notes 
to  an  equal  amount.  And  such  worn-out  or  mutilated  notes, 
after  a  memorandum  shall  have  been  entered  in  the  proper 
books,  in  accordance  with  such  regulations  as  may  be  established 
by  the  Comptroller,  as  well  as  all  circulating  notes  which  shall 
have  been  paid  or  surrendered  to  be  cancelled,  shall  be  burned 
to  ashes  in  presence  of  four  persons,  one  to  be  appointed  by  the 
Secretary  of  the  Treasury,  one  by  the  Comptroller  of  the  Cur- 
rency, one  by  the  Treasurer  of  the  United  States,  and  one  by 
the  association,  under  such  regulations  as  the  Secretary  of  the 
Treasury  may  prescribe.  And  a  certificate  of  such  burning, 
signed  by  the 'parties  so  appointed,  shall  be  made  in  the  books 


520  CONTEST  FOR  SOUND  MONEY 

of  the  Comptroller,  and  a  duplicate  thereof  forwarded  to  the 
association  whose  notes  are  thus  cancelled.  [Amended  by  Acts 
of  June  20  and  June  23,  1874.] 

Sec.  25.  That  it  shall  be  the  duty  of  every  banking  associa- 
tion having  bonds  deposited  in  the  office  of  the  Treasurer  of  the 
United  States,  once  or  oftener  in  each  fiscal  year,  and  at  such 
time  or  times  during  the  ordinary  business  hours  as  said  officer 
or  officers  may  select,  to  examine  and  compare  the  bonds  so 
pledged  with  the  books  of  the  Comptroller  and  the  accounts  of 
the  association,  and,  if  found  correct,  to  execute  to  the  said 
Treasurer  a  certificate  setting  forth  the  different  kinds  and  the 
amounts  thereof,  and  that  the  same  are  in  the  possession  and 
custody  of  the  Treasurer  at  the  date  of  such  certificate.  Such 
examination  may  be  made  by  an  officer  or  agent  of  such  associa- 
tion, duly  appointed  in  writing  for  that  purpose,  whose  certificate 
before  mentioned  shall  be  of  like  force  and  validity  as  if  executed 
by  such  president  or  cashier;  and  a  duplicate  signed  by  the 
Treasurer  shall  be  retained  by  the  association. 

Sec.  26.  That  the  bonds  transferred  to  and  deposited  with 
the  Treasurer  of  the  United  States,  as  hereinbefore  provided,  by 
any  banking  association  for  the  security  of  its  circulating  notes, 
shall  be  held  exclusively  for  that  purpose,  until  such  notes  shall 
be  redeemed,  except  as  provided  in  this  act ;  but  the  Comp- 
troller of  the  Currency  shall  give  to  any  such  banking  associa- 
tion powers  of  attorney  to  receive  and  appropriate  to  its  own 
use  the  interest  on  the  bonds  which  it  shall  have  so  transferred 
to  the  Treasurer ;  but  such  powers  shall  become  inoperative 
whenever  such  banking  association  shall  fail  to  redeem  its  circu- 
lating notes  as  aforesaid.  Whenever  the  market  or  cash  value  of 
any  bonds  deposited  with  the  Treasurer  of  the  United  States,  as 
aforesaid,  shall  be  reduced  below  the  amount  of  the  circulation 
issued  for  the  same,  the  Comptroller  of  the  Currency  is  hereby 
authorized  to  demand  and  receive  the  amount  of  such  deprecia- 
tion in  other  United  States  bonds  at  cash  value,  or  in  money, 
from  the  association  receiving  said  bills,  to  be  deposited  with  the 
Treasurer  of  the  United  States  as  long  as  such  depreciation  con- 
tinues. And  said  Comptroller,  upon  the  terms  prescribed  by 
the  Secretary  of  the  Treasury,  may  permit  an  exchange  to  be 
made  of  any  of  the  bonds  deposited  with  the  Treasurer  by  an 
association  for  other  bonds  of  the  United  States  authorized  by 
this  act  to  be  received  as  security  for  circulating  notes,  if  he  shall 
be  of  opinion  that  such  an  exchange  can  be  made  without  prej- 
udice to  the  United  States,  and  he  may  direct  the  return  of  any 
of  said  bonds  to  the  banking  association  which  transferred  the 
same,  in  sums  of  not  less  than  $1000,  upon  the  surrender  to  him 


APPENDIX  521 

and  the  cancellation  of  a  proportionate  amount  of  such  circu- 
lating notes  ' :  Provided,  That  the  remaining  bonds  which  shall 
have  been  transferred  by  the  banking  association  offering  to 
surrender  circulating  notes  shall  be  equal  to  the  amount  re- 
quired for  the  circulating  notes  not  surrendered  by  such  bank- 
ing association,  and  that  the  amount  of  bonds  in  the  hands  of 
the  Treasurer  shall  not  be  diminished  below  the  amount  required 
to  be  kept  on  deposit  with  him  by  this  act :  And  provided,  That 
there  shall  have  been  no  failure  by  such  association  to  redeem 
its  circulating  notes,  and  no  other  violation  by  such  association 
of  the  provisions  of  this  act,  and  that  the  market  or  cash  value 
of  the  remaining  bonds  shall  not  be  below  the  amount  required 
for  the  circulation  issued  for  the  same. 

Sec.  27.  That  it  shall  be  unlawful  for  any  officer  acting  under 
the  provisions  of  this  act  to  countersign  or  deliver  to  any  associa- 
tion, or  to  any  other  company  or  person,  any  circulating  notes 
contemplated  by  this  act,  except  as  hereinbefore  provided,  and 
in  accordance  with  the  true  intent  and  meaning  of  this  act. 
And  any  officer  who  shall  violate  the  provisions  of,  this  section 
shall  be  deemed  guilty  of  a  high  misdemeanor,  and  on  convic- 
tion thereof  shall  be  punished  by  fine  not  exceeding  double  the 
amount  so  countersigned  and  delivered,  and  imprisonment  not 
less  than  one  year  and  not  exceeding  15  years,  at  the  discretion 
of  the  court  in  which  he  shall  be  tried. 

Sec.  28.  That  it  shall  be  lawful  for  any  such  association  to 
purchase,  hold,  and  convey  real  estate  as  follows : 

I.  Such  as  shall  be  necessary  for  its  immediate  accommoda- 
tion in  the  transaction  of  its  business. 

II.  Such  as  shall  be  mortgaged  to  it  in  good  faith  by  way  of 
security  for  debts  previously  contracted. 

III.  Such  as  shall  be  conveyed  to  it  in  satisfaction  of  debts 
previously  contracted  in  the  course  of  its  dealings. 

IV.  Such  as  it  shall  purchase  at  sales  under  judgments,  de- 
crees, or  mortgages  held  by  such  association,  or  shall  purchase 
to  secure  debts  due  to  said  association. 

Such  association  shall  not  purchase  or  hold  real  estate  in  any 
other  case  or  for  any  other  purpose  than  as  specified  in  this  sec- 
tion. Nor  shall  it  hold  the  possession  of  any  real  estate  under 
mortgage,  or  hold  the  title  and  possession  of  any  real  estate 
purchased  to  secure  any  debts  due  to  it  for  a  longer  period 
than  five  years. 

Sec.  29.  That  the  total  liabilities  to  any  association,  of  any 
person,  or  of  any  company,  corporation,  or  firm  for  money 
borrowed,  including  in  the  liabilities  of  a  company  or  firm  the 
1  See  Acts  of  June  20,  1874,  and  July  12,  1882. 


522  CONTEST  FOR  SOUND  MONEY 

liabilities  of  the  several  members  thereof,  shall  at  no  time 
exceed  one  tenth  part  of  the  amount  of  the  capital  stock  of 
such  association  actually  paid  in  :  Provided,  That  the  discount 
of  bona  fide  bills  of  exchange  drawn  against  actually  existing 
values,  and  the  discount  of  commercial  or  business  paper 
actually  owned  by  the  person  or  persons,  corporation,  or  firm 
negotiating  the  same  shall  not  be  considered  as  money  borrowed. 

Sec.  30.  That  every  association  may  take,  receive,  reserve, 
and  charge  on  any  loan  or  discount  made,  or  upon  any  note, 
bill  of  exchange,  or  other  evidences  of  debt,  interest  at  the 
rate  allowed  by  the  laws  of  the  State  or  Territory  where  the 
bank  is  located,  and  no  more,  except  that  where  by  the  laws 
of  any  State  a  different  rate  is  limited  for  banks  of  issue 
organized  under  State  laws,  the  rate  so  limited  shall  be  allowed 
for  associations  organized  in  any  such  State  under  this  act. 
And  when  no  rate  is  fixed  by  the  laws  of  the  State  or  Territory, 
the  bank  may  take,  receive,  reserve,  or  charge  a  rate  not 
exceeding  7  per  centum,  and  such  interest  may  be  taken  in 
advance,  reckoning  the  days  for  which  the  note,  bill,  or  other 
evidence  of  debt  has  to  run.  And  the  knowingly  taking, 
receiving,  reserving,  or  charging  a  rate  of  interest  greater  than 
aforesaid  shall  be  held  and  adjudged  a  forfeiture  of  the  entire 
interest  which  the  note,  bill,  or  other  evidence  of  debt  carries 
with  it,  or  which  has  been  agreed  to  be  paid  thereon.  And  in 
case  a  greater  rate  of  interest  has  been  paid,  the  person  or 
persons  paying  the  same,  or  their  legal  representatives  may 
recover  back,  in  any  action  of  debt,  twice  the  amount  of  the 
interest  thus  paid  from  the  association  taking  or  receiving  the 
same  :  Provided,  That  such  action  is  commenced  within  two 
years  from  the  time  the  usurious  transaction  occurred.  But 
the  purchase,  discount,  or  sale  of  a  bona  fide  bill  of  exchange, 
payable  at  another  place  than  the  place  of  such  purchase,  dis- 
count, or  sale,  at  not  more  than  the  current  rate  of  exchange 
for  sight  drafts  in  addition  to  the  interest,  shall  not  be  consid- 
ered as  taking  or  receiving  a  greater  rate  of  interest. 

Sec.  31.  That  every  association  in  the  cities  hereinafter 
named  shall,  at  all  times,  have  on  hand,  in  lawful  money  of  the 
United  States,  an  amount  equal  to  at  least  25  per  centum  of 
the  aggregate  amount  of  its  notes  in  circulation  and  its 
deposits ;  and  every  other  association  shall,  at  all  times,  have 
on  hand,  in  lawful  money  of  the  United  States,  an  amount 
equal  to  at  least  15  per  centum  of  the  aggregate  amount  of  its 
notes  in  circulation,  and  of  its  deposits.1      And  whenever  the 

1  Amended  by  Act  of  June  20,  1874.     See  also  Act  of  March  2,  1867. 


APPENDIX  523 

lawful  money  of  any  association  in  any  of  the  cities  hereinafter 
named  shall  be  below  the  amount  of  25  per  centum  of  its  cir- 
culation and  deposits,  and  whenever  the  lawful  money  of  any 
other  association  shall  be  below.  1 5  per  centum  of  its  circulation 
and  deposits,  such  association  shall  not  increase  its  liabilities 
by  making  any  new  loans  or  discounts  otherwise  than  by  dis- 
counting or  purchasing  bills  of  exchange  payable  at  sight,  nor 
make  any  dividend  of  its  profits  until  the  required  proportion 
between  the  aggregate  amount  of  its  outstanding  notes  of  cir- 
culation and  deposits  and  its  lawful  money  of  the  United  States 
shall  be  restored  :  Provided,  That  three  fifths  of  said  15  per 
centum  may  consist  of  balances  due  to  an  association  available 
for  the  redemption  of  its  circulating  notes  from  associations 
approved  by  the  Comptroller  of  the  Currency,  organized  under 
this  act,  in  the  cities  of  Saint  Louis,  Louisville,  Chicago, 
Detroit,  Milwaukee,  New  Orleans,  Cincinnati,  Cleveland, 
Pittsburg,  Baltimore,  Philadelphia,  Boston,  New  York,  Albany, 
Leavenworth,  San  Francisco,  and  Washington  City  :  *  Provided, 
also,  That  clearing-house  certificates  representing  specie  or 
lawful  money  specially  deposited  for  the  purpose  of  any  clear- 
ing-house association,  shall  be  deemed  to  be  lawful  money  in 
the  possession  of  any  association  belonging  to  such  clearing- 
house holding  and  owning  such  certificate,  and  shall  be  consid- 
ered to  be  a  part  of  the  lawful  money  which  such  association 
is  required  to  have  under  the  foregoing  provisions  of  this  sec- 
tion :  Provided,  That  the  cities  of  Charleston  and  Richmond 
may  be  added  to  the  list  of  cities  in  the  national  associations 
of  which  other  associations  may  keep  three  fifths  of  their  law- 
ful money,  whenever,  in  the  opinion  of  the  Comptroller  of  the 
Currency,  the  condition  of  the  Southern  States  will  warrant  it. 
And  it  shall  be  competent  for  the  Comptroller  of  the  Currency 
to  notify  any  association,  whose  lawful  money  reserve  as  afore- 
said shall  be  below  the  amount  to  be  kept  on  hand  as  afore- 
said, to  make  good  such  reserve ;  and  if  such  association  shall 
fail  for  30  days  thereafter  so  to  make  good  its  reserve  of  law- 
ful money  of  the  United  States,  the  Comptroller  may,  with  the 
concurrence  of  the  Secretary  of  the  Treasury,  appoint  a 
receiver  to  wind  up  the  business  of  such  association,  as  pro- 
vided in  this  act. 

Sec.  32.  That  each  association  organized  in  any  of  the  cities 
named  in  the  foregoing  section  shall  select,  subject  to  the  ap- 
proval of  the  Comptroller  of  the  Currency,  an  association  in  the 
city  of  New  York,  at  which  it  will  redeem  its  circulating  notes 

1  Reserve  cities  increased  by  Act  of  March  3,  1887. 


524  CONTEST  FOR  SOUND  MONEY 

at  par.1  And  each  of  such  associations  may  keep  one  half  of  its 
lawful  money  reserve  in  cash  deposits  in  the  city  of  New  York. 
And  each  association  not  organized  within  the  cities  named  in 
the  preceding  section  shall  select,  subject  to  the  approval  of  the 
Comptroller  of  the  Currency,  an  association  in  either  of  the 
cities  named  in  the  preceding  section  at  which  it  will  redeem 
its  circulating  notes  at  par,  and  the  Comptroller  shall  give  pub- 
lic notice  of  the  names  of  the  associations  so  selected  at  which 
redemptions  are  to  be  made  by  the  respective  associations,  and 
of  any  change  that  may  be  made  of  the  association  at  which  the 
notes  of  any  association  are  redeemed.  If  any  association  shall 
fail  either  to  make  the  selection  or  to  redeem  its  notes  as  afore- 
said, the  Comptroller  of  the  Currency  may,  upon  receiving 
satisfactory  evidence  thereof,  appoint  a  receiver,  in  the  manner 
provided  for  in  this  act,  to  wind  up  its  affairs  :  Pro7>ided,  That 
nothing  in  this  section  shall  relieve  any  association  from  its 
liability  to  redeem  its  circulating  notes  at  its  own  counter,  at 
par,  in  lawful  money,  on  demand  :  And  provided,  further, 
That  every  association  formed  or  existing  under  the  provisions 
of  this  act  shall  take  and  receive  at  par,  for  any  debt  or  liability 
to  said  association,  any  and  all  notes  or  bills  issued  by  any 
association  existing  under  and  by  virtue  of  this  act. 

Sec.  33.  That  the  directors  of  any  association  may,  semi- 
annually, each  year,  declare  a  dividend  of  so  much  of  the  nett 
profits  of  the  association  as  they  shall  judge  expedient ;  but 
each  association  shall,  before  the  declaration  of  a  dividend, 
carry  one  tenth  part  of  its  nett  profits  of  the  preceding  half  year 
to  its  surplus  fund  until  the  same  shall  amount  to  20  per  centum 
of  its  capital  stock. 

Sec.  34.  That  every  association  shall  make  to  the  Comp- 
troller of  the  Currency  a  report,  according  to  the  form  which 
may  be  prescribed  by  him,  verified  by  the  oath  or  affirmation 
of  the  president  or  cashier  of  such  association ;  which  report 
shall  exhibit  in  detail,  and  under  appropriate  heads,  the  resources 
and  liabilities  of  the  association  before  the  commencement  of 
business  on  the  morning  of  the  first  Monday  of  the  months 
of  January,  April,  July,  and  October  of  each  year,  and  shall 
transmit  the  same  to  the  Comptroller  within  5  days  thereafter. 
And  any  bank  failing  to  make  and  transmit  such  report  shall  be 
subject  to  a  penalty  of  $100  for  each  day  after  5  days  that  such 
report  is  delayed  beyond  that  time.  And  the  Comptroller  shall 
publish  abstracts  of  said  reports  in  a  newspaper  to  be  designated 

1  Amended  by  Act  of  June  20,  1874.  Changed  under  operation  of  Act 
of  March  3,  1887  ;  Chicago  and  St.  Louis  added. 


APPENDIX  525 

by  him  for  that  purpose  in  the  city  of  Washington,  and  the 
separate  report  of  each  association  shall  be  published  in  a  news- 
paper in  the  place  where  such  association  is  established,  or 
if  there  be  no  newspaper  at  such  place,  then  in  a  newspaper 
published  at  the  nearest  place  thereto,  at  the  expense  of  the 
association  making  such  report.  In  addition  to  the  quarterly 
reports  required  by  this  section,  every  association  shall,  on  the 
first  Tuesday  of  each  month,  make  to  the  Comptroller  of  the 
Currency  a  statement,  under  the  oath  of  the  president  or 
cashier,  showing  the  condition  of  the  association  making  such 
statement,  on  the  morning  of  the  day  next  preceding  the  date 
of  such  statement,  in  respect  to  the  following  items  and  particu- 
lars, to  wit :  average  amount  of  loans  and  discounts,  specie,  and 
other  lawful  money  belonging  to  the  association,  deposits,  and 
circulation.  And  associations  in  other  places  than  those  cities 
named  in  the  31st  section  of  this  act  shall  also  return  the 
amount  duethem  available  for  the  redemption  of  theircirculation.1 

Sec.  35.  That  no  association  shall  make  any  loan  or  discount 
on  the  security  of  the  shares  of  its  own  capital  stock,  nor  be  the 
purchaser  or  holder  of  any  such  shares,  unless  such  security  or 
purchase  shall  be  necessary  to  prevent  loss  upon  a  debt  previ- 
ously contracted  in  good  faith ;  and  stock  so  purchased  or 
acquired  shall,  within  6  months  from  the  time  of  its  purchase,  be 
sold  or  disposed  of  at  public  or  private  sale,  in  default  of  which  a 
receiver  may  be  appointed  to  close  up  the  business  of  the  asso- 
ciation, according  to  the  provisions  of  this  act. 

Sec.  36.  That  no  association  shall  at  any  time  be  indebted, 
or  in  any  way  liable,  to  an  amount  exceeding  the  amount  of  its 
capital  stock  at  such  time  actually  paid  in  and  remaining  un- 
diminished by  losses  or  otherwise,  except  on  the  following 
accounts,  that  is  to  say :  — 

I.  On  account  of  its  notes  of  circulation. 

II.  On  account  of  moneys  deposited  with,  or  collected  by, 
such  association. 

III.  On  accounts  of  bills  of  exchange  or  drafts  drawn  against 
money  actually  on  deposit  to  the  credit  of  such  association,  or 
due  thereto. 

IV.  On  account  of  liabilities  to  its  stockholders  for  dividends 
and  reserved  profits. 

Sec.  37.  That  no  association  shall,  either  directly  or  indirectly, 
pledge  or  hypothecate  any  of  its  notes  of  circulation,  for  the 
purpose  of  procuring  money  to  be  paid  in  on  its  capital  stock, 

1  Act  of  March  3,  1869,  amends  form  of  and  manner  of  making 
reports. 


526  CONTEST  FOR  SOUND  MONEY 

or  to  be  used  in  its  banking  operations,  or  otherwise  ;  nor  shall 
any  association  use  its  circulating  notes,  or  any  part  thereof,  in 
any  manner  or  form,  to  create  or  increase  its  capital  stock. 

Sec.  38.  That  no  association,  or  any  member  thereof, 
shall,  during  the  time  it  shall  continue  its  banking  opera- 
tions, withdraw,  or  permit  to  be  withdrawn,  either  in  form 
of  dividends  or  otherwise,  any  portion  of  its  capital.  And 
if  losses  shall  at  any  time  have  been  sustained  by  any 
such  association  equal  to  or  exceeding  its  undivided  profits 
then  on  hand,  no  dividend  shall  be  made ;  and  no  divi- 
dend shall  ever  be  made  by  any  association,  while  it  shall 
continue  its  banking  operations,  to  an  amount  greater  than  its 
nett  profits  then  on  hand,  deducting  therefrom  its  losses  and 
bad  debts.  And  all  debts  due  to  any  association,  on  which  in- 
terest is  past  due  and  unpaid  for  a  period  of  6  months,  unless 
the  same  shall  be  well  secured,  and  shall  be  in  process  of  col- 
lection, shall  be  considered  bad  debts  within  the  meaning  of  this 
act :  Provided,  That  nothing  in  this  section  shall  prevent  the 
reduction  of  the  capital  stock  of  the  association  under  the  13th 
section  of  this  act. 

Sec.  39.  That  no  association  shall  at  any  time  pay  out  on 
loans  or  discounts,  or  in  purchasing  drafts  or  bills  of  exchange, 
or  in  payment  of  deposits,  or  in  any  other  mode  pay  or  put  in 
circulation  the  notes  of  any  bank  or  banking  association  which 
shall  not,  at  any  such  time,  be  receivable,  at  par,  on  deposit  and 
in  payment  of  debts  by  the  association  so  paying  out  or  circu- 
lating such  notes ;  nor  shall  it  knowingly  pay  out  or  put  in  cir- 
culation any  notes  issued  by  any  bank  or  banking  association 
which  at  the  time  of  such  paying  out  or  putting  in  circulation 
is  not  redeeming  its  circulating  notes  in  lawful  money  of  the 
United  States. 

Sec.  40.  That  the  president  and  cashier  of  every  such  asso- 
ciation shall  cause  to  be  kept  at  all  times  a  full  and  correct  list  of 
the  names  and  residences  of  all  the  shareholders  in  the  associa- 
tion, and  the  number  of  shares  held  by  each,  in  the  office  where 
its  business  is  transacted;  and  such  list  shall  be  subject  to  the 
inspection  of  all  the  shareholders  and  creditors  of  the  associa- 
tion, and  the  officers  authorized  to  assess  taxes  under  State 
authority,  during  business  hours  of  each  day  in  which  business 
may  be  legally  transacted ;  and  a  copy  of  such  list,  on  the  first 
Monday  of  July  in  each  year,  verified  by  the  oath  of  such  pres- 
ident or  cashier,  shall  be  transmitted  to  the  Comptroller  of  the 
Currency. 

Sec.  41.  That  the  plates  and  special  dies  to  be  procured  by 
the  Comptroller  of  the  Currency  for  the  printing  of  such  circu- 


APPENDIX  527 

lating  notes  shall  remain  under  his  control  and  direction,  and 
the  expenses  necessarily  incurred  in  executing  the  provisions 
of  this  act  respecting  the  procuring  of  such  notes,  and  all  other 
expenses  of  the  Bureau,  shall  be  paid  out  of  the  proceeds  of  the 
taxes  on  duties  now  or  hereafter  to  be  assessed  on  the  circula- 
tion, and  collected  from  associations  organized  under  this  act. 
And  in  lieu  of  all  existing  taxes,  every  association  shall  pay  to 
the  Treasurer  of  the  United  States,  in  the  months  of  January 
and  July,  a  duty  of  one  half  of  one  per  centum  each  half  year 
from  and  after  the  1st  of  January,  1864,  upon  the  average 
amount  of  its  notes  in  circulation,  and  a  duty  of  one-quarter  of 
one  per  centum  each  half  year  upon  the  average  amount  of  its 
deposits,  and  a  duty  of  one-quarter  of  one  per  centum  each 
half  year,  as  aforesaid,  on  the  average  amount  of  its  capital 
stock  beyond  the  amount  invested  in  United  States  bonds  ; x 
and  in  case  of  default  in  the  payment  thereof  of  any  asso- 
ciation, the  duties  aforesaid  may  be  collected  in  the  manner 
provided  for  the  collection  of  United  States  duties  of  other 
corporations,  or  the  Treasurer  may  reserve  the  amount  of  said 
duties  out  of  the  interest,  as  it  may  become  due,  on  the  bonds 
deposited  with  him  by  such  defaulting  association.  And  it 
shall  be  the  duty  of  each  association,  within  10  days  from  the 
first  days  of  January  and  July  of  each  year,  to  make  a  return, 
under  the  oath  of  its  president  or  cashier,  to  the  Treasurer  of 
the  United  States,  in  such  form  as  he  may  prescribe,  of  the 
average  amount  of  its  notes  in  circulation,  and  of  the  average 
amount  of  its  deposits,  and  of  the  average  amount  of  its  capital 
stock,  beyond  the  amount  invested  in  United  States  bonds,  for 
the  6  months  next  preceding  said  first  days  of  January  and 
July  as  aforesaid,  and  in  default  of  such  return,  and  for  each 
default  thereof,  each  defaulting  association  shall  forfeit  and  pay 
to  the  United  States  the  sum  of  $200,  to  be  collected  either 
out  of  the  interest  as  it  may  become  due  such  association  on 
the  bonds  deposited  with  the  Treasurer,  or,  at  his  option,  in  the 
manner  in  which  penalties  are  to  be  collected  of  other  corpo- 
rations under  the  laws  of  the  United  States  ;  and  in  case  of  such 
default  the  amount  of  the  duties  to  be  paid  by  such  association 
shall  be  assessed  upon  the  amount  of  notes  delivered  to  such 
association  by  the  Comptroller  of  the  Currency,  and  upon  the 
highest  amount  of  its  deposits  and  capital  stock,  to  be  ascer- 
tained in  such  other  manner  as  the  Treasurer  may  deem  best : 
Provided,  That  nothing  in  this  act  shall  be  construed  to  prevent 
all  the  shares  in  any  of  the  said  associations,  held  by  any  per- 


Amended  by  Acts  of  March  3,  1883,  and  March  14,  1900. 


528  CONTEST  FOR  SOUND  MONEY 

son  or  body  corporate,  from  being  included  in  the  valuation  of 
the  personal  property  of  such  person  or  corporation  in  the  assess- 
ment of  taxes  imposed  by  or  under  State  authority  at  the  place 
where  such  bank  is  located,  and  not  elsewhere,  but  not  at  a 
greater  rate  than  is  assessed  upon  other  moneyed  capital  in  the 
hands  of  individual  citizens  of  such  State  :  Provided,  further, 
That  the  tax  so  imposed  under  the  laws  of  any  State  upon  the 
shares  of  any  of  the  associations  authorized  by  this  act  shall  not 
exceed  the  rate  imposed  upon  the  shares  in  any  of  the  banks 
organized  under  authority  of  the  State  where  such  association 
is  located  :  Provided,  also,  That  nothing  in  this  act  shall  exempt 
the  real  estate  of  associations  from  either  State,  county,  or 
municipal  taxes  to  the  same  extent,  according  to  its  value,  as 
other  real  estate  is  taxed. 

Sec.  42.  That  any  association  may  go  into  liquidation  and 
be  closed  by  the  vote  of  its  shareholders  owning  two  thirds  of 
its  stock.1  And  whenever  such  vote  shall  be  taken  it  shall  be 
the  duty  of  the  board  of  directors  to  cause  notice  of  this  fact 
to  be  certified,  under  the  seal  of  the  association,  by  its  president 
or  cashier,  to  the  Comptroller  of  the  Currency,  and  publication 
thereof  to  be  made  for  a  period  of  two  months  in  a  newspaper 
published  in  the  city  of  New  York,  and  also  in  a  newspaper 
published  in  a  city  or  town  in  which  the  association  is  located, 
and  if  no  newspaper  be  there  published,  then  in  the  newspaper 
published  nearest  thereto,  that  said  association  is  closing  up  its 
affairs,  and  notifying  the  holders  of  its  notes  and  other  creditors 
to  present  the  notes  and  other  claims  against  the  association  for 
payment.  And  at  any  time  after  the  expiration  of  one  year  from 
the  time  of  the  publication  of  such  notice  as  aforesaid,  the  said 
association  may  pay  over  to  the  Treasurer  of  the  United  States 
the  amount  of  its  outstanding  notes  in  the  lawful  money  of  the 
United  States,  and  take  up  the  bonds  which  said  association  has 
on  deposit  with  the  Treasurer  for  the  security  of  its  circulating 
notes  ; 2  which  bonds  shall  be  assigned  to  the  bank  in  the  manner 
specified  in  the  19th  section  of  this  act,  and  from  that  time  the 
outstanding  notes  of  said  association  shall  be  redeemed  at  the 
Treasury  of  the  United  States,  and  the  said  association  and 
the  shareholders  thereof  shall  be  discharged  from  all  liabilities 
therefor. 

Sec.  43.  That  the  Treasurer,  on  receiving  from  an  associa- 
tion lawful  money  for  the  payment  and  redemption  of  its 
outstanding  notes,  as  provided  for  in  the  preceding  section  of 
this  act,  shall  execute  duplicate  receipts  therefor,  one  to  the 

1  See  Act  of  July  14,  1870. 

2  See  Act  of  July  12,  1882. 


APPENDIX  529 

association  and  the  other  to  the  Comptroller  of  the  Currency, 
stating  the  amount  received  by  him,  and  the  purpose  for 
which  it  has  been  received,  which  amount  shall  be  paid  into 
the  Treasury  of  the  United  States,  and  placed  to  the  credit  of 
sqch  association  upon  redemption  account.  And  it  shall  be 
the  duty  of  the  Treasurer,  whenever  he  shall  redeem  any  of 
the  notes  of  said  association,  to  cause  the  same  to  be  mutilated, 
and  charged  to  the  redemption  account  of  said  association ; 
and  all  notes  so  redeemed  by  the  Treasurer  shall,  every  three 
months,  be  certified  to  and  burned  in  the  manner  prescribed  in 
the  twenty-fourth  section  of  this  act.1 

Sec.  44.  That  any  bank  incorporated  by  special  law,  or  any 
banking  institution  organized  under  a  general  law  of  any  State, 
may,  by  authority  of  this  act,  become  a  national  association 
under  its  provisions,  by  the  name  prescribed  in  its  organization 
certificate  ;  and  in  such  case  the  articles  of  association  and  the 
organization  certificate  required  by  this  act  may  be  executed 
by  a  majority  of  the  directors  of  the  bank  or  banking  institu- 
tion ;  and  said  certificate  shall  declare  that  the  owners  of 
two-thirds  of  the  capital  stock  have  authorized  the  directors  to 
make  such  certificate  and  to  change  and  convert  the  said  bank 
or  banking  institution  into  a  national  association  under  this  act. 
And  a  majority  of  the  directors,  after  executing  said  articles  of 
association  and  organization  certificate,  shall  have  power  to 
execute  all  other  papers,  and  to  do  whatever  may  be  required 
to  make  its  organization  perfect  and  complete  as  a  national 
association.2  The  shares  of  any  such  bank  may  continue  to  be 
for  the  same  amount  each  as  they  were  before  said  conversion, 
and  the  directors  aforesaid  may  be  the  directors  of  the  associa- 
tion until  others  are  elected  or  appointed  in  accordance  with 
the  provisions  of  this  act;  and  any  state  bank  which  is  a  stock- 
holder in  any  other  bank,  by  authority  of  state  laws,  may  con- 
tinue to  hold  its  stock,  although  either  bank,  or  both,  may  be 
organized  under  and  have  accepted  the  provisions  of  this  act. 
When  the  comptroller  shall  give  to  such  association  a  certificate, 
under  his  hand  and  official  seal,  that  the  provisions  of  this  act 
have  been  complied  with,  and  that  it  is  authorized  to  commence 
the  business  of  banking  under  it,  the  association  shall  have  the 
same  powers  and  privileges,  and  shall  be  subject  to  the  same 
duties,  responsibilities,  and  rules,  in  all  respects  as  are  prescribed 
in  tnis  act  for  other  associations  organized  under  it,  and  shall  be 
held  and  regarded  as  an  association  under  this  act :  Provided, 

1  Maceration  in  lieu  of  burning  provided  for  June  23,  1874. 

2  See  Act  of  March  3,  1865,  as  to  banks  with  branches. 


530  CONTEST  FOR  SOUND  MONEY 

however,  That  no  such  association  shall  have  a  less  capital  than 
the  amount  prescribed  for  banking  associations  under  this  act. 

Sec.  45.  That  all  associations  under  this  act,  when  designated 
for  that  purpose  by  the  Secretary  of  the  Treasury,  shall  be  de- 
positaries of  public  money,  except  receipts  from  customs,  under 
such  regulations  as  may  be  prescribed  by  the  Secretary ;  and 
they  may  also  be  employed  as  financial  agents  of  the  Govern- 
ment ;  and  they  shall  perform  all  such  reasonable  duties,  as 
depositaries  of  public  moneys  and  financial  agents  of  the 
Government,  as  may  be  required  of  them.  And  the  Secretary 
of  the  Treasury  shall  require  of  the  associations  thus  designated 
satisfactory  security,  by  the  deposit  of  United  States  bonds  and 
otherwise,  for  the  safe-keeping  and  prompt  payment  of  the 
public  money  deposited  with  them,  and  for  the  faithful  per- 
formance of  their  duties  as  financial  agents  of  the  Govern- 
ment :  Provided,  That  every  association  which  shall  be  selected 
and  designated  as  receiver  or  depositary  of  the  public  money 
shall  take  and  receive  at  par  all  of  the  national  currency  bills, 
by  whatever  association  issued,  which  have  been  paid  into  the 
Government  for  internal  revenue,  or  for  loans  or  stocks. 

Sec.  46.  That  if  any  such  association  shall  at  any  time  fail 
to  redeem,  in  the  lawful  money  of  the  United  States,  any  of 
its  circulating  notes,  when  payment  thereof  shall  be  lawfully 
demanded,  during  the  usual  hours  of  business,  at  the  office  of 
such  association,  or  at  its  place  of  redemption  aforesaid,  the 
holder  may  cause  the  same  to  be  protested,  in  one  package, 
by  a  notary-public,  unless  the  president  or  cashier  of  the  asso- 
ciation whose  notes  are  presented  for  payment,  or  the  president 
or  cashier  of  the  association  at  the  place  at  which  they  are 
redeemable,  shall  offer  to  waive  demand  and  notice  of  the 
protest,  and  shall,  in  pursuance  of  such  offer,  make,  sign,  and 
deliver  to  the  party  making  such  demand  an  admission  in 
writing,  stating  the  time  of  the  demand,  the  amount  demanded, 
and  the  fact  of  the  non-payment  thereof;  and  such  notary- 
public,  on  making  such  protest,  or  upon  receiving  such  admis- 
sion, shall  forthwith  forward  such  admission  or  notice  of  protest 
to  the  Comptroller  of  the  Currency,  retaining  a  copy  thereof. 
And  after  such  default,  on  examination  of  the  facts  by  the 
Comptroller,  and  notice  by  him  to  the  association,  it  shall 
not  be  lawful  for  the  association  suffering  the  same  to  pay 
out  any  of  its  notes,  discount  any  notes  or  bills,  or  otherwise 
prosecute  the  business  of  banking,  except  to  receive  and 
safely  keep  money  belonging  to  it,  and  to  deliver  special 
deposits :  Provided,  That  if  satisfactory  proof  be  produced 
to  such  notary-public  that  the  payment  of  any  such  notes  is 


APPENDIX  531 

restrained  by  order  of  any  court  of  competent  jurisdiction, 
such  notary-public  shall  not  protest  the  same ;  and  when  the 
holder  of  such  notes  shall  cause  more  than  one  note  or  package 
to  be  protested  on  the  same  day,  he  shall  not  receive  pay  for 
more  than  one  protest. 

Sec.  47.  That  on  receiving  notice  that  any  such  association 
has  failed  to  redeem  any  of  its  circulating  notes,  as  specified 
in  the  next  preceding  section,  the  Comptroller  of  the  Currency, 
with  the  concurrence  of  the  Secretary  of  the  Treasury,  may 
appoint  a  special  agent  (of  whose  appointment  immediate 
notice  shall  be  given  to  such  association)  who  shall  imme- 
diately proceed  to  ascertain  whether  such  association  has 
refused  to  pay  its  circulating  notes  in  the  lawful  money  of  the 
United  States,  when  demanded  as  aforesaid,  and  report  to  the 
Comptroller  the  fact  so  ascertained ;  and  if,  from  such  protest 
or  the  report  so  made,  the  Comptroller  shall  be  satisfied  that 
such  association  has  refused  to  pay  its  circulating  notes  as 
aforesaid  and  is  in  default,  he  shall,  within  30  days  after  he 
shall  have  received  notice  of  such  failure,  declare  the  United 
States  bonds  and  securities  pledged  by  such  association  for- 
feited to  the  United  States,  and  the  same  shall  thereupon  be 
forfeited  accordingly.  And  thereupon  the  Comptroller  shall 
immediately  give  notice  in  such  manner  as  the  Secretary  of 
the  Treasury  shall,  by  general  rules  or  otherwise,  direct,  to  the 
holders  of  the  circulating  notes  of  such  association  to  present 
them  for  payment  at  the  Treasury  of  the  United  States,  and 
the  same  shall  be  paid  as  presented  in  lawful  money  of  the 
United  States  ;  whereupon  said  Comptroller  may,  in  his  dis- 
cretion, cancel  an  amount  of  bonds  pledged  by  such  association 
equal  at  current  market  rates,  not  exceeding  par,  to  the  notes 
paid.  And  it  shall  be  lawful  for  the  Secretary  of  the  Treasury, 
from  time  to  time,  to  make  such  regulations  respecting  the 
disposition  to  be  made  of  such  circulating  notes  after  presen- 
tation thereof  for  payment  as  aforesaid,  and  respecting  the  per- 
petuation of  the  evidence  of  the  payment  thereof  as  may 
seem  to  him  proper ;  but  all  such  notes,  on  being  paid,  shall 
be  cancelled.  And  for  any  deficiency  in  the  proceeds  of 
the  bonds  pledged  by  such  association,  when  disposed  of  as 
hereinafter  specified,  to  reimburse  to  the  United  States  the 
amount,  so  expended  in  paying  the  circulating  notes  of  such 
association,  the  United  States  shall  have  a  first  and  paramount 
lien  upon  all  the  assets  of  such  association  ;  and  such  deficiency 
shall  be  made  good  out  of  such  assets  in  preference  to  any  and 
all  other  claims  whatsoever,  except  the  necessary  costs  and 
expenses  of  administering  the  same. 


532  CONTEST  FOR  SOUND  MONEY 

Sec.  48.  That  whenever  the  Comptroller  shall  become  satis- 
fied, as  in  the  last  preceding  section  specified,  that  any  asso- 
ciation has  refused  to  pay  its  circulating  notes  as  therein  men- 
tioned, he  may,  instead  of  cancelling  the  United  States  bonds 
pledged  by  such  association,  as  provided  in  the  next  preceding 
section,  cause  so  much  of  them  as  may  be  necessary  to  redeem 
the  outstanding  circulating  notes  of  such  association  to  be  sold 
at  public  auction  in  the  city  of  New  York,  after  giving  30  days' 
notice  of  such  sale  to  such  association. 

Sec.  49.  That  the  Comptroller  of  the  Currency  may,  if  he 
shall  be  of  opinion  that  the  interests  of  the  United  States  will 
be  best  promoted  thereby,  sell  at  private  sale  any  of  the  bonds 
pledged  by  such  association,  and  receive  therefor  either  money 
or  the  circulating  notes  of  such  failing  association :  Provided, 
That  no  such  bonds  shall  be  sold  by  private  sale  for  less  than 
par,  nor  less  than  the  market  value  thereof  at  the  time  of  sale  : 
And  provided,  further,  That  no  sales  of  any  such  bonds,  either 
public  or  private,  shall  be  complete  until  the  transfer  thereof 
shall  have  been  made  with  the  formalities  prescribed  in  this  act. 

Sec.  50.  That  on  becoming  satisfied,  as  specified  in  this 
act,  that  any  association  has  refused  to  pay  its  circulating  notes 
as  therein  mentioned,  and  is  in  default,  the  Comptroller  of 
the  Currency  may  forthwith  appoint  a  receiver,  and  require 
of  him  such  bond  and  security  as  he  shall  deem  proper,  who, 
under  the  direction  of  the  Comptroller,  shall  take  possession 
of  the  books,  records,  and  assets  cf  every  description  of  such 
association,  collect  all  debts,  dues,  and  claims  belonging  to 
such  association,  and,  upon  the  order  of  a  court  of  record  of 
competent  jurisdiction,  may  sell  or  compound  all  bad  or  doubt- 
ful debts,  and,  on  a  like  order,  sell  all  the  real  and  personal 
property  of  such  association,  on  such  terms  as  the  court  shall 
direct ;  and  may,  if  necessary  to  pay  the  debts  of  such  asso- 
ciation, enforce  the  individual  liability  of  the  stockholders 
provided  for  by  the  12th  section  of  this  act;  and  such  receiver 
shall  pay  over  all  money  so  made  to  the  Treasurer  of  the 
United  States,  subject  to  the  order  of  the  Comptroller  of  the 
Currency,  and  also  make  report  to  the  Comptroller  of  the  Cur- 
rency of  all  his  acts  and  proceedings.  The  Comptroller  shall 
thereupon  cause  notice  to  be  given,  by  advertisement  in  such 
newspapers  as  he  may  direct,  for  three  consecutive  months, 
calling  on  all  persons  who  may  have  claims  against  such  asso- 
ciation to  present  the  same,  and  to  make  legal  proof  thereof. 
And  from  time  to  time  the  Comptroller,  after  full  provision 
shall  have  been  first  made  for  refunding  to  the  United  States 
any  such  deficiency  in  redeeming  the  notes  of  such  association 


APPENDIX  533 

as  is  mentioned  in'this  act,  shall  make  a  ratable  dividend  of  the 
money  so  paid  over  to  him  by  such  receiver  on  all  such  claims 
as  may  have  been  proved  to  his  satisfaction  or  adjudicated  in  a 
court  of  competent  jurisdiction  ;  and  from  time  to  time,  as  the 
proceeds  of  the  assets  of  such  association  shall  be  paid  over  to 
him,  he  shall  make  further  dividends,  as  aforesaid,  on  all 
claims  previously  proved  or  adjudicated ;  and  the  remainder 
of  such  proceeds,  if  any,  shall  be  paid  over  to  the  shareholders 
of  such  association,  or  their  legal  representatives,  in  proportion 
to  the  stock  by  them  respectively  held  :  Provided,  however, 
That  if  such  association  against  which  proceedings  have  been 
so  instituted,  on  account  of  any  alleged  refusal  to  redeem  its 
circulating  notes  as  aforesaid,  shall  deny  having  failed  to  do  so, 
such  association  may,  at  any  time  within  ten  days  after  such 
association  shall  have  been  notified  of  the  appointment  of  an 
agent,  as  provided  in  this  act,  apply  to  the  nearest  circuit,  or 
district,  or  Territorial  court  of  the  United  States,  to  enjoin  further 
proceedings  in  the  premises ;  and  such  court,  after  citing  the 
Comptroller  of  the  Currency  to  show  cause  why  further  pro- 
ceedings should  not  be  enjoined,  and  after  the  decision  of  the 
court  or  finding  of  a  jury  that  such  association  has  not  refused 
to  redeem  its  circulating  notes,  when  legally  presented,  in  the 
lawful  money  of  the  United  States,  shall  make  an  order  enjoin- 
ing the  Comptroller,  and  any  receiver  acting  under  his  direction, 
from  all  further  proceedings  on  account  of  such  alleged  refusal. 

Sec.  51.  That  all  fees  for  protesting  the  notes  issued  by  any 
such  banking  association  shall  be  paid  by  the  person  procuring 
the  protest  to  be  made,  and  such  banking  association  shall  be 
liable  therefor ;  but  no  part  of  the  bonds  pledged  by  such 
banking  association,  as  aforesaid,  shall  be  applied  to  the  pay- 
ment of  such  fees.  And  all  expenses  of  any  preliminary  or 
other  examinations  into  the  condition  of  any  association  shall 
be  paid  by  such  association  ;  and  all  expenses  of  any  receiver- 
ship shall  be  paid  out  of  the  assets  of  such  association  before 
distribution  of  the  proceeds  thereof. 

Sec.  52.  That  all  transfer  of  the  notes,  bonds,  bills  of 
exchange,  and  other  evidences  of  debt  owing  to  any  associa- 
tion, or  of  deposits  to  its  credit ;  all  assignments  of  mortgages, 
sureties  on  real  estate,  or  of  judgments  or  decrees  in  its  favor ; 
all  deposits  of  money,  bullion,  or  other  valuable  thing  for  its 
use ;  or  for  the  use  of  any  of  its  shareholders  or  creditors ; 
and  all  payments  of  money  to  either,  made  after  the  commis- 
sion of  an  act  of  insolvency,  or  in  contemplation  thereof,  with 
a  view  to  prevent  the  application  of  its  assets  in  the  manner 
prescribed  by  this  act,  or  with  a  view  to  the  preference  of  one 


534  CONTEST  FOR  SOUND  MONEY 

creditor  to  another,  except  in  payment  of  its  circulating  notes, 
shall  be  utterly  null  and  void. 

Sec.  53.  That  if  the  directors  of  any  association  shall  know- 
ingly violate,  or  knowingly  permit  any  of  the  officers,  agents, 
or  servants  of  the  association  to  violate  any  of  the  provisions 
of  this  act,  all  the  rights,  privileges,  and  franchises  of  the  asso- 
ciation derived  from  this  act  shall  be  thereby  forfeited.  Such 
violation  shall,  however,  be  determined  and  adjudged  by  a 
proper  circuit,  district,  or  Territorial  court  of  the  United  States, 
in  a  suit  brought  for  that  purpose  by  the  Comptroller  of  the 
Currency,  in  his  own  name,  before  the  association  shall  be 
declared  dissolved.  And  in  cases  of  such  violation,  every 
director  who  participated  in  or  assented  to  the  same  shall  be 
held  liable  in  his  personal  and  individual  capacity  for  all  dam- 
ages which  the  association,  its  shareholders,  or  any  other  per- 
son, shall  have  sustained  in  consequence  of  such  violation. 

Sec.  54.  That  the  Comptroller  of  the  Currency,  with  the 
approbation  of  the  Secretary  of  the  Treasury,  as  often  as  shall 
be  deemed  necessary  or  proper,  shall  appoint  a  suitable  person 
or  persons  to  make  an  examination  of  the  affairs  of  every 
banking  association,  which  person  shall  not  be  a  director  or 
other  officer  in  any  association  whose  affairs  he  shall  be 
appointed  to  examine,  and  who  shall  have  power  to  make  a 
thorough  examination  into  all  the  affairs  of  the  association, 
and,  in  doing  so,  to  examine  any  of  the  officers  and  agents 
thereof  on  oath ;  and  shall  make  a  full  and  detailed  report  of 
the  condition  of  the  association  to  the  Comptroller.  And  the 
association  shall  not  be  subject  to  any  other  visitorial  powers 
than  such  as  are  authorized  by  this  act,  except  such  as  are 
vested  in  the  several  courts  of  law  and  chancery.  And  every 
person  appointed  to  make  such  examination  shall  receive  for 
his  services  at  the  rate  of  $5  for  each  day  by  him  employed  in 
such  examination,  and  $2  for  every  25  miles  he  shall  neces- 
sarily travel  in  the  performance  of  his  duty,  which  shall  be 
paid  by  the  association  by  him  examined. 

Sec.  55.  That  every  president,  director,  cashier,  teller,  clerk, 
or  agent  of  any  association,  who  shall  embezzle,  abstract,  or 
willfully  misapply  any  of  the  moneys,  funds,  or  credits  of  the 
association,  or  shall,  without  authority  from  the  directors,  issue 
or  put  in  circulation  any  of  the  notes  of  the  association,  or 
shall,  without  such  authority,  issue  or  put  forth  any  certificate 
of  deposit,  draw  any  order  or  bill  of  exchange,  make  any 
acceptance,  assign  any  note,  bond,  draft,  bill  of  exchange, 
mortgage,  judgment,  or  decree,  or  shall  make  any  false  entry 
in   any   book,   report,   or   statement  of  the   association,  with 


APPENDIX  535 

intent,  in  either  case,  to  injure  or  defraud  the  association  or 
any  other  company,  body  politic  or  corporate,  or  any  individual 
person  or  to  deceive  any  officer  of  the  association,  or  any  agent 
appointed  to  examine  the  affairs  of  any  such  association,  shall 
be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  punished  by  imprisonment  not  less  than  5 
nor  more  than  10  years. 

Sec.  56.  That  all  suits  and  proceedings  arising  out  of  the 
provisions  of  this  act,  in  which  the  United  States  or  its  officers 
or  agents  shall  be  parties,  shall  be  conducted  by  the  district 
attorneys  of  the  several  districts,  under  the  direction  and 
supervision  of  the  Solicitor  of  the  Treasury. 

Sec.  57.  That  suits,  actions,  and  proceedings,  against  any 
association  under  this  act,  may  be  had  in  any  circuit,  district, 
or  Territorial  court  of  the  United  States  held  within  the  dis- 
trict in  which  such  association  may  be  established ;  or  in  any 
State,  county,  or  municipal  court  in  the  county  or  city  in 
which  said  association  is  located,  having  jurisdiction  in  similar 
cases :  Provided,  however,  That  all  proceedings  to  enjoin  the 
Comptroller  under  this  act  shall  be  had  in  a  circuit,  district,  or 
Territorial  court  of  the  United  States,  held  in  the  district  in 
which  the  association  is  located. 

Sec.  58.  That  every  person  who  shall  mutilate,  cut,  deface, 
disfigure,  or  perforate  with  holes,  or  shall  unite  or  cement 
together,  or  do  any  other  thing  to  any  bank  bill,  draft,  note,  or 
other  evidence  of  debt,  issued  by  any  such  association,  or  shall 
cause  or  procure  the  same  to  be  done,  with  intent  to  render 
such  bank  bill,  draft,  note,  or  other  evidence  of  debt  unfit  to 
be  reissued  by  said  association,  shall,  upon  conviction,  forfeit 
$50  to  the  association  who  shall  be  injured  thereby,  to  be 
recovered  by  action  in  any  court  having  jurisdiction. 

Sec.  59.  That  if  any  person  shall  falsely  make,  forge,  or 
counterfeit,  or  cause  or  procure  to  be  made,  forged  or  counter- 
feited, or  willingly  aid  or  assist  in  falsely  making,  forging,  or 
counterfeiting,  any  note  in  imitation  of,  or  purporting  to  be  in 
imitation  of,  the  circulating  notes  issued  under  the  provisions 
of  this  act,  or  shall  pass,  utter,  or  publish,  or  attempt  to  pass, 
utter,  or  publish,  any  false,  forged,  or  counterfeited  note,  pur- 
porting to  be  issued  by  any  association  doing  a  banking  busi- 
ness under  the  provisions  of  this  act,  knowing  the  same  to  be 
falsely  made,  forged,  or  counterfeited,  or  shall  falsely  alter,  or 
cause  or  procure  to  be  falsely  altered,  or  willingly  aid  or  assist 
in  falsely  altering,  any  such  circulating  notes,  issued  as  afore- 
said, or  shall  pass,  utter,  or  publish,  or  attempt  to  pass,  utter, 
or  publish,  as  true,  any  falsely  altered  or  spurious  circulating 


536  CONTEST  FOR  SOUND  MONEY 

note  issued,  or  purporting  to  have  been  issued,  as  aforesaid, 
knowing  the  same  to  be  falsely  altered  or  spurious,  every  such 
person  shall  be  deemed  and  adjudged  guilty  of  felony,  and 
being  thereof  convicted  by  due  course  of  law  shall  be  sentenced 
to  be  imprisoned  and  kept  at  hard  labor  for  a  period  of  not 
less  than  5  years,  nor  more  than  15  years,  and  fined  in  a  sum 
not  exceeding  #1,000. 

Sec.  60.  That  if  any  person  shall  make  or  engrave,  or 
cause  or  procure  to  be  made  or  engraved,  or  shall  have  in 
his  custody  or  possession  any  plate,  die,  or  block  after  the 
similitude  of  any  plate,  die,  or  block  from  which  any  circu- 
lating notes  issued  as  aforesaid  shall  have  been  prepared  or 
printed,  with  intent  to  use  such  plate,  die,  or  block,  or  cause 
or  suffer  the  same  to  be  used,  in  forging  or  counterfeiting 
any  of  the  notes  issued  as  aforesaid,  or  shall  have  in  his 
custody  or  possession  any  blank  note  or  notes  engraved  and 
printed  after  the  similitude  of  any  notes  issued  as  aforesaid, 
with  intent  to  use  such  blanks,  or  cause  or  suffer  the  same  to 
be  used,  in  forging  or  counterfeiting  any  of  the  notes  issued 
as  aforesaid,  or  shall  have  in  his  custody  or  possession  any 
paper  adapted  to  the  making  of  such  notes,  and  similar  to 
the  paper  upon  which  any  such  notes  shall  have  been  issued, 
with  intent  to  use  such  paper,  or  cause  or  suffer  the  same  to 
be  used,  in  forging  or  counterfeiting  any  of  the  notes  issued 
as  aforesaid,  every  such  person,  being  thereof  convicted  by 
due  course  of  law,  shall  be  sentenced  to  be  imprisoned  and 
kept  to  hard  labor  for  a  term  not  less  than  5  or  more  than  15 
years,  and  fined  in  a  sum  not  exceeding  $1,000. 

Sec.  61.  That  it  shall  be  the  duty  of  the  Comptroller  of 
the  Currency  to  report  annually  to  Congress  at  the  com- 
mencement of  its  session  — 

I.  A  summary  of  the  state  and  condition  of  every  associa- 
tion from  whom  reports  have  been  received  the  preceding 
year,  at  the  several  dates  to  which  such  reports  refer,  with 
an  abstract  of  the  whole  amount  of  banking  capital  returned 
by  them,  of  the  whole  amount  of  their  debts  and  liabilities, 
the  amount  of  circulating  notes  outstanding,  and  the  total 
amount  of  means  and  resources,  specifying  the  amount  of 
lawful  money  held  by  them  at  the  times  of  their  several 
returns,  and  such  other  information  in  relation  to  said  associ- 
ations as,  in  his  judgment,  may  be  useful. 

II.  A  statement  of  the  associations  whose  business  has 
been  closed  during  the  year,  with  the  amount  of  their  circula- 
tion redeemed  and  the  amount  outstanding. 

III.  Any  amendment  to  the  laws  relative  to  banking  by 


APPENDIX  537 

which  the  system  may  be  improved,  and  the  security  of  the 
holders  of  its  notes  and  other  creditors  may  be  increased. 

IV.  The  names  and  compensation  of  the  clerks  employed 
by  him,  and  the  whole  amount  of  the  expenses  of  the  banking 
department  during  the  year.  And  such  report  shall  be  made 
by  or  before  the  ist  day  of  December  in  each  year,  and  the 
usual  number  of  copies  for  the  use  of  the  Senate  and  House, 
and  1,000  copies  for  the  use  of  the  department,  shall  be 
printed  by  the  Public  Printer  and  in  readiness  for  distribu- 
tion at  the  first  meeting  of  Congress.1 

[Sec.  62  provides  for  the  repeal  of  the  Act  of  1863  and  the 
legalization  of  all  proceedings  taken  under  it  by  banks,  etc.] 

Sec.  63.  That  persons  holding  stock  as  executors,  adminis- 
trators, guardians,  and  trustees,  shall  not  be  personally  subject 
to  any  liabilities  as  stockholders  ;  but  the  estates  and  funds  in 
their  hands  shall  be  liable  in  like  manner  and  to  the  same 
extent  as  the  testator,  intestate,  ward,  or  person  interested  in 
said  trust-funds  would  be  if  they  were  respectively  living  and 
competent  to  act  and  hold  the  stock  in  their  own  names. 

Sec.  64.  That  Congress  may  at  any  time  amend,  alter,  or 
repeal  this  act. 

Act  of  June  30,   1864 — To  provide  ways  and  means  for  the 
support  of  the  Government,  and  for  other  purposes 

Be  it  enacted,  etc.  [Sec.  i  authorizes  the  Secretary  of  the 
Treasury  to  issue  $400,000,000  of  bonds.] 

Sec.  2.  That  the  Secretary  of  the  Treasury  may  issue  on 
the  credit  of  the  United  States,  and  in  lieu  of  an  equal  amount 
of  bonds  authorized  by  the  preceding  section,  and  as  a  part  of 
said  loan,  not  exceeding  $200,000,000,  in  treasury  notes  of  any 
denomination  not  less  than  $10,  payable  at  any  time  not  exceed- 
ing 3  years  from  date,  or,  if  thought  more  expedient,  redeemable 
at  any  time  after  3  years  from  date,  and  bearing  interest  not 
exceeding  the  rate  of  7^  per  centum,  payable  in  lawful  money 
at  maturity,  or,  at  the  discretion  of  the  Secretary,  semi-annually. 
And  the  said  treasury  notes  may  be  disposed  of  by  the  Secretary 
of  the  Treasury,  on  the  best  terms  that  can  be  obtained,  for 
lawful  money ;  and  such  of  them  as  shall  be  made  payable, 
principal  and  interest,  at  maturity,  shall  be  a  legal  tender  to 
the  same  extent  as  United  States  notes  for  their  face  value, 
excluding  interest,  and  may  be  paid  to  any  creditor  of  the 
United  States  at  their  face  value,  excluding  interest,  or  to  any 

1  In  1873  he  was  also  required  to  collect  statistics  of  state  banks,  etc., 
and  report  thereon. 


538  CONTEST  FOR  SOUND  MONEY 

creditor  willing  to  receive  them  at  par,  including  interest ;  and 
any  treasury  notes  issued  under  the  authority  of  this  act  may 
be  made  convertible,  at  the  discretion  of  the  Secretary  of  the 
Treasury,  into  any  bonds  issued  under  the  authority  of  this  act. 
And  the  Secretary  of  the  Treasury  may  redeem  and  cause  to 
be  cancelled  and  destroyed  any  treasury  notes  or  United  States 
notes  heretofore  issued  under  authority  of  previous  acts  of 
Congress,  and  substitute,  in  lieu  thereof,  an  equal  amount  of 
treasury  notes  such  as  are  authorized  by  this  act,  or  of  other 
United  States  notes  :  Provided,  That  the  total  amount  of  bonds 
and  treasury  notes  authorized  by  the  first  and  second  sections 
of  this  act  shall  not  exceed  $400,000,000,  in  addition  to  the 
amounts  heretofore  issued  ;  nor  shall  the  total  amount  of  United 
States  notes,  issued  or  to  be  issued,  ever  exceed  $400,000,000, 
and  such  additional  sum,  not  exceeding  $50,000,000,  as  may 
be  temporarily  required  for  the  redemption  of  temporary  loan  ; 
nor  shall  any  treasury  note  bearing  interest,  issued  under  this 
act,  be  a  legal  tender  in  payment  or  redemption  of  any  notes 
issued  by  any  bank,  banking  association,  or  banker,  calculated 
or  intended  to  circulate  as  money. 

[Sec.  3.  Bonds  may  be  issued  in  exchange  for  the  7-30 
treasury  notes ;  interest  on  notes  to  cease  in  3  months  after 
notice  of  redemption.  Limitation  of  loan  of  March  3,  1864, 
to  current  fiscal  year  repealed.  Authority  to  issue  bonds  under 
Act  of  March  3,  1863,  repealed  except  as  to  $75,000,000 
already  advertised.] 

Sec.  4.  That  the  Secretary  of  the  Treasury  may  authorize 
the  receipt,  as  a  temporary  loan,  of  United  States  notes  or  the 
notes  of  national  banking  associations  on  deposit  for  not  less 
than  30  days,  in  sums  of  not  less  than  $50,  by  any  of  the  assistant 
treasurers  of  the  United  States,  or  depositaries  designated  for 
that  purpose,  other  than  national  banking  associations,  who 
shall  issue  certificates  of  deposit  in  such  form  as  the  Secretary 
of  the  Treasury  shall  prescribe,  bearing  interest  not  exceeding 
6  per  centum  annually,  and  payable  at  any  time  after  the  term 
of  deposit,  and  after  10  days'  subsequent  notice,  unless  time 
and  notice  be  waived  by  the  Secretary  of  the  Treasury ;  and 
the  Secretary  of  the  Treasury  may  increase  the  interest  on 
deposits  at  less  than  6  per  centum  to  that  rate,  or,  on  10  days' 
notice  to  depositors,  may  diminish  the  rate  of  interest  as  the 
public  interest  may  require  ;  but  the  aggregate  of  such  deposits 
shall  not  exceed  $150,000,000  ;  and  the  Secretary  of  the  Treas- 
ury may  issue,  and  shall  hold  in  reserve  for  payment  of  such 
deposits,  United  States  notes  not  exceeding  $50,000,000,  includ- 
ing the  amount  already  applied  in  such  payment ;  and  the  United 


APPENDIX  539 

States  notes,  so  held  in  reserve,  shall  be  used  only  when  needed, 
in  his  judgment,  for  the  prompt  payment  of  such  deposits  on 
demand,  and  shall  be  withdrawn  and  placed  again  in  reserve 
as  the  amount  of  deposits  shall  again  increase. 

Sec.  5.  That  the  Secretary  of  the  Treasury  may  issue  notes 
of  the  fractions  of  a  dollar  as  now  used  for  currency,  in  such 
form,  with  such  inscriptions,  and  with  such  safeguards  against 
counterfeiting,  as  he  may  judge  best, x  and  provide  for  the  en- 
graving and  preparation,  and  for  the  issue  of  the  same,  as  well  as 
of  all  other  notes  and  bonds,  and  other  obligations,  and  shall  make 
such  regulations  for  the  redemption  of  said  fractional  notes  and 
other  notes  when  mutilated  or  defaced,  and  for  the  receipt  of  said 
fractional  notes  in  payment  of  debts  to  the  United  States,  except 
for  customs,  in  such  sums,  not  over  #5,  as  may  appear  to  him 
expedient ;  and  it  is  hereby  declared  that  all  laws  and  parts  of 
laws  applicable  to  the  fractional  notes  engraved  and  issued  as 
herein  authorized,  apply  equally  and  with  like  force  to  all  the 
fractional  notes  heretofore  authorized,  whether  known  as  postage 
currency  or  otherwise,  and  to  postage  stamps  issued  as  currency ; 
but  the  whole  amount  of  all  descriptions  of  notes  or  stamps 
less  than  $1  issued  as  currency,  shall  not  exceed  $50,000,000. 

[Secs.  6-13.  Form  of  bonds  and  notes ;  issue  of  registered 
bonds  for  coupon ;  instructions  to  receivers  of  public  moneys ; 
necessary  expenses  not  to  exceed  one  per  cent,  of  amount  of 
notes  and  bonds  issued ;  penalties  against  counterfeiting,  etc.] 


Act  of  January  28,   1865 — Amending  the  preceding  act  of 
June  30,  1864 

Be  it  enacted,  etc.,  That  in  lieu  of  any  bonds  authorized  to 
be  issued  by  the  first  section  of  the  act  entitled  "  An  act  to 
provide  ways  and  means  for  the  support  of  the  Government," 
approved  June  30,  1864,  that  may  remain  unsold  at  the  date 
of  this  act,  the  Secretary  of  the  Treasury  may  issue,  under  the 
authority  of  said  act,  treasury  notes  of  the  description  and 
character  authorized  by  the  second  section  of  said  act :  Provided, 
That  the  whole  amount  of  bonds  authorized  as  aforesaid,  and 
Treasury  notes  issued  and  to  be  issued  in  lieu  thereof,  shall  not 
exceed  the  sum  of  $400,000,000 ;  and  such  treasury  notes  may 
be  disposed  of  for  lawful  money,  or  for  any  other  treasury  notes 

1  By  the  Act  of  March  3,  1865,  authorizing  the  coinage  of  three-cent 
pieces  and  for  other  purposes,  the  issue  of  fractional  notes  of  less  denom- 
ination than  five  cents  was  forbidden,  and  by  the  Act  of  May  16,  1866,  the 
issue  of  such  notes  of  less  denomination  than  ten  cents  was  forbidden. 


540  CONTEST  FOR  SOUND  MONEY 

or  certificates  of  indebtedness  or  certificates  of  deposit  issued 
under  any  previous  act  of  Congress ;  and  such  notes  shall  be 
exempt  from  taxation  by  or  under  State  or  municipal  authority. 
Sec.  2.  [Unsold  5-20  bonds,  not  exceeding  $4,000,000, 
may  be  sold  by  the  Secretary  in  Europe  or  in  the  United 
States,  on  such  terms  as  he  may  deem  most  advisable.]  Pro- 
vided, That  this  act  shall  not  be  so  construed  as  to  give  any 
authority  for  the  issue  of  any  legal  tender  notes,  in  any  form, 
beyond  the  balance  unissued  of  the  amount  authorized  by  the 
second  section  of  the  act  to  which  this  is  an  amendment. 

Act  of  March  3,  1865  —  To  provide  ways  and  means  for  the 
support  of  the  Government 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  be, 
and  he  is  hereby,  authorized  to  borrow  from  time  to  time,  on 
the  credit  of  the  United  States,  in  addition  to  the  amounts 
heretofore  authorized,  any  sums  not  exceeding  in  the  aggregate 
$600,000,000,  and  to  issue  therefor  bonds  or  Treasury  notes  of 
the  United  States,  in  such  form  as  he  may  prescribe ;  and  so 
much  thereof  as  may  be  issued  in  bonds  shall  be  of  denomina- 
tions not  less  than  $50,  and  may  be  made  payable  at  any  period 
not  more  than  40  years  from  date  of  issue,  or  may  be  made 
redeemable,  at  the  pleasure  of  the  Government,  at  or  after  any 
period  not  less  than  5  years  nor  more  than  40  years  from  date, 
or  may  be  made  redeemable  and  payable  as  aforesaid,  as  may 
be  expressed  upon  their  face ;  and  so  much  thereof  as  may  be 
issued  in  Treasury  notes  may  be  made  convertible  into  any 
bonds  authorized  by  this  act,  and  may  be  of  such  denomina- 
tions—  not  less  than  $50  —  and  bear  such  dates  and  be  made 
redeemable  or  payable  at  such  periods  as  in  the  opinion  of  the 
Secretary  of  the  Treasury  may  be  deemed  expedient.  And 
the  interest  on  such  bonds  shall  be  payable  semi-annually ;  and 
on  Treasury  notes  authorized  by  this  act  the  interest  may  be 
made  payable  semi-annually,  or  annually,  or  at  maturity  thereof ; 
and  the  principal,  or  interest,  or  both,  may  be  made  payable 
in  coin  or  in  other  lawful  money  :  Provided,  That  the  rate  of 
interest  on  any  such  bonds  or  Treasury  notes,  when  payable  in 
coin  shall  not  exceed  6  per  centum  per  annum  ;  and  when  not 
payable  in  coin  shall  not  exceed  7^-  per  centum  per  annum ; 
and  the  rate  and  character  of  interest  shall  be  expressed  on  all 
such  bonds  or  Treasury  notes  :  And  provided  further,  That  the 
act  entitled  "  An  act  to  provide  ways  and  means  for  the  sup- 
port of  the  Government,  and  for  other  purposes,"  approved 
June  30,  1864,  shall  be  so  construed  as  to  authorize  the  issue 


APPENDIX  541 

of  bonds  of  any  description  authorized  by  this  act.  And  any 
Treasury  notes  or  other  obligations  bearing  interest,  issued 
under  any  act  of  Congress,  may,  at  the  discretion  of  the  Secre- 
tary of  the  Treasury,  and  with  the  consent  of  the  holder,  be 
converted  into  any  description  of  bonds  authorized  by  this 
act ;  and  no  bonds  so  authorized  shall  be  considered  a  part  of 
the  amount  of  $600,000,000  hereinbefore  authorized. 

Sec.  2.  That  the  Secretary  of  the  Treasury  may  dispose  of 
any  of  the  bonds  or  other  obligations  issued  under  this  act, 
either  in  the  United  States  or  elsewhere,  in  such  manner,  and 
at  such  rates  and  under  such  conditions,  as  he  may  think 
advisable,  for  coin,  or  for  other  lawful  money  of  the  United 
States,  or  for  any  Treasury  notes,  certificates  of  indebtedness, 
or  certificates  of  deposit,  or  other  representatives  of  value, 
which  have  been  or  may  be  issued  under  any  act  of  Congress ; 
and  may,  at  his  discretion,  issue  bonds  or  Treasury  notes 
authorized  by  this  act,  in  payment  for  any  requisitions  for 
materials  or  supplies  which  shall  have  been  made  by  the 
appropriate  Department  or  offices  upon  the  Treasury  of  the 
United  States,  on  receiving  notice  in  writing,  through  the  De- 
partment or  office  making  the  requisition,  that  the  owner  of 
the  claim  for  which  the  requisition  is  issued  desires  to  subscribe 
for  an  amount  of  loan  that  will  cover  said  requisition,  or  any 
part  thereof  ;  and  all  bonds  or  other  obligations  issued  under 
this  act  shall  be  exempt  from  taxation  by  or  under  State  or 
municipal  authority. 

Sec.  3.  .  .  .  That  nothing  herein  contained  shall  be  con- 
strued as  authorizing  the  issue  of  legal  tender  notes  in  any 
form  ;  .  .  . 

Act  of  March  3,  1865  —  \_Tax  on  state  bank-notes  and  conver- 
sion of  state  banks'] 

********** 

Sec.  6.  That  every  national  banking  association,  state  bank, 
or  state  banking  association  shall  pay  a  tax  of  10  per  centum 
on  the  amount  of  notes  of  any  state  bank  or  state  banking 
association  paid  out  by  them  after  the  first  day  of  July,  1866. 

Sec.  7.  That  any  existing  bank  organized  under  the  laws  of 
any  State,  having  a  paid-up  capital  of  not  less  than  $ 75,000, 
which  shall  apply  before  the  first  day  of  July  next  for  authority 
to  become  a  national  bank  under  the  act  entitled  "  An  act  to 
provide  a  national  currency,"  etc.,  approved  June  3,  1864,  and 
shall  comply  with  all  the  requirements  of  said  act,  shall,  if 

1  See  Acts  of  July  13,  1866,  March  3,  1867,  and  February  8,  1875. 


542  CONTEST  FOR  SOUND  MONEY 

such  bank  be  found  by  the  Comptroller  of  the  Currency  to  be 
in  good  standing  and  credit,  receive  such  authority  in  prefer- 
ence to  new  associations  applying  for  the  same  :  Provided, 
That  it  shall  be  lawful  for  any  banking  association  organized 
under  State  laws,  and  having  branches,  the  capital  being  joint 
and  assigned  to  and  used  by  the  mother  bank  and  branches  in 
definite  proportions,  to  become  a  national  banking  association 
in  conformity  with  existing  laws,  and  to  retain  and  keep  in 
operation  its  branches,  or  such  one  or  more  of  them  as  it  may 
elect  to  retain ;  the  amount  of  the  circulation  redeemable  at 
the  mother  bank  and  each  branch  to  be  regulated  by  the 
amount  of  capital  assigned  to  and  used  by  each. 

Act  of  March   3,   1865 — Amending  "An  act  to  provide  a 
national  currency"  etc. 

Be  it  enacted,  etc.,  That  section  21  of  said  act  be  so  amended 
that  said  section  shall  read  as  follows : 

Sec.  2 1 .  That  upon  the  transfer  and  delivery  of  bonds  to 
the  Treasurer,  as  provided  in  the  foregoing  section,  the  asso- 
ciation making  the  same  shall  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency  circulating  notes  of  different  de- 
nominations, in  blank,  registered  and  countersigned  as  herein- 
after provided,  equal  in  amount  to  90  per  centum  of  the  current 
market  value  of  the  United  States  bonds  so  transferred  and 
delivered,  but  not  exceeding  90  per  centum  of  the  amount  of 
said  bonds  at  the  par  value  thereof,  if  bearing  interest  at  a  rate 
not  less  than  5  per  centum  per  annum ;  and  the  amount  of 
said  circulating  notes  to  be  furnished  to  each  association  shall 
be  in  proportion  to  its  paid-up  capital  as  follows,  and  no  more  : 
To  each  association  whose  capital  shall  not  exceed  $500,000, 
90  per  centum  of  such  capital ;  to  each  association  whose  capi- 
tal exceeds  $500,000,  but  does  not  exceed  $1,000,000,  80  per 
centum  of  such  capital ;  to  each  association  whose  capital 
exceeds  $1,000,000,  but  does  not  exceed  $3,000,000,  75  per 
centum  of  such  capital ;  to  each  association  whose  capital 
exceeds  $3,000,000,  60  per  cent,  of  such  capital.  And  that 
$150,000,000  of  the  entire  amount  of  circulating  notes  author- 
ized to  be  issued  shall  be  apportioned  to  associations  in  the 
States,  in  the  District  of  Columbia,  and  in  the  Territories, 
according  to  representative  population,  and  the  remainder  shall 
be  apportioned  by  the  Secretary  of  the  Treasury  among  asso- 
ciations formed  in  the  several  States,  in  the  District  of  Columbia, 
and  in  the  Territories,  having  due  regard  to  the  existing  bank- 


APPENDIX  543 

ing  capital,  resources,  and  business  of  such  States,  District,  and 
Territories. 


Act  of  April  12,  1866  —  To  amend  an  act  entitled  "An  act 
to  provide  ways  and  means  to  support  the  Government,1 
approved  March  3,  1865 

Be  it  enacted,  etc.,  That  the  act  entitled  "  An  act  to  provide 
ways  and  means  to  support  the  Government,"  approved  March  3, 
1865,  shall  be  extended  and  construed  to  authorize  the  Secre- 
tary of  the  Treasury,  at  his  discretion,  to  receive  any  Treasury 
notes  or  other  obligations  issued  under  any  act  of  Congress, 
whether  bearing  interest  or  not,  in  exchange  for  any  description 
of  bonds  authorized  by  the  act  to  which  this  is  an  amendment ; 
and  also  to  dispose  of  any  description  of  bonds  authorized  by 
said  act,  either  in  the  United  States  or  elsewhere,  to  such  an 
amount,  in  such  manner,  and  at  such  rates  as  he  may  think 
advisable,  for  lawful  money  of  the  United  States,  or  for  any 
Treasury  notes,  certificates  of  indebtedness,  or  certificates  of 
deposit,  or  other  representatives  of  value,  which  have  been  or 
which  may  be  issued  under  any  act  of  Congress,  the  proceeds 
thereof  to  be  used  only  for  retiring  Treasury  notes  or  other 
obligations  issued  under  any  act  of  Congress ;  but  nothing 
herein  contained  shall  be  construed  to  authorize  any  increase 
of  the  public  debt :  Provided,  That  of  United  States  notes  not 
more  than  $10,000,000  may  be  retired  and  cancelled  within 
6  months  from  the  passage  of  this  act,  and  thereafter  not  more 
than  $4,000,000  in  any  one  month:1  And  provided  further, 
That  the  act  to  which  this  is  an  amendment  shall  continue  in 
full  force  in  all  its  provisions,  except  as  modified  by  this  act. 


Act  of  July  13,  1866  —  \Tax  on  state  bank-notes'] 

Sec.  9.  [Amends  section  6  of  the  Act  of  March  3,  1865 
{ante) ,  to  read]  :  That  every  national  banking  association,  state 
bank,  or  state  banking  association,  shall  pay  a  tax  of  10  per 
centum  on  the  amount  of  notes  of  any  person,  state  bank,  or 
state  banking  association,  used  for  circulation  and  paid  out  by 
them  after  the  first  day  of  August,  1866,  and  such  tax  shall  be 
assessed  and  paid  in  such  a  manner  as  shall  be  prescribed  by 
the  commissioner  of  internal  revenue. 


1  See  Act  of  February  4,  1868. 


544  CONTEST  FOR  SOUND  MONEY 

Act  of  March  2, 1867 —  [Provides  for  temporary  loan  certificates'] 

Be  it  enacted,  etc.,  That  for  the  purpose  of  redeeming  and  re- 
tiring any  compound-interest  notes  outstanding,  the  Secretary 
of  the  Treasury  is  hereby  authorized  and  directed  to  issue  tem- 
porary loan  certificates  in  the  manner  prescribed  by  section 
four  of  the  act  entitled  "  An  act  to  authorize  the  issue  of  United 
States  notes,  etc.,"  approved  February  25,  1862,  bearing  interest 
at  a  rate  not  exceeding  3  per  centum  per  annum,  principal  and 
interest  payable  in  lawful  money  on  demand ;  and  said  certifi- 
cates of  temporary  loan  may  constitute  and  be  held,  by  any 
national  bank  holding  or  owning  the  same,  as  a  part  of  the  re- 
serve provided  for  in  sections  31  and  32  of  the  act  entitled 
"An  act  to  provide  a  national  currency,  etc.,"  approved  June  3, 
1864  :  Provided,  That  not  less  than  two-fifths  of  the  entire  re- 
serve of  such  bank  shall  consist  of  lawful  money  of  the  United 
States:  And  provided  further,  That  the  amount  of  such  tem- 
porary certificates  at  any  time  outstanding  shall  not  exceed 
#50,000,000. 

Act  of  March  26,  1867  —  \_Tax  on  state  bank-notes,  etc.] 

Sec.  2.  That  every  national  banking  association,  state  bank 
or  banker,  or  association,  shall  pay  a  tax  of  10  per  centum  on 
the  amount  of  notes  of  any  town,  city,  or  municipal  corporation, 
paid  out  by  them  after  the  first  day  of  May,  a.d.  1867,  to  be 
collected  in  the  mode  and  manner  in  which  the  tax  on  the  notes 
of  state  banks  is  collected. 

Act  of  February  4,  1868  —  To  suspend  further  reduction  of  the 

currency 

Be  it  enacted,  etc.,  That,  from  and  after  the  passage  of  this 
act,  the  authority  of  the  Secretary  of  the  Treasury  to  make  any 
reduction  of  the  currency,  by  retiring  or  cancelling  United 
States  notes,  shall  be,  and  is  hereby,  suspended ;  but  nothing 
herein  contained  shall  prevent  the  cancellation  and  destruction 
of  mutilated  United  States  notes,  and  the  replacing  of  the  same 
with  notes  of  the  same  character  and  amount. 

[Became  a  law  without  the  President's  signature.] 

Act  of  July  25, 1868 —  To  provide  for  afurther  issue  of  temporary 
loan  certificates,  etc. 

Be  it  enacted,  etc.,  That  for  the  sole  purpose  of  redeeming 
and  retiring  the  remainder  of  the  compound  interest  notes  out- 


APPENDIX  545 

standing,  the  Secretary  of  the  Treasury  is  hereby  authorized 
and  directed  to  issue  an  additional  amount  of  temporary  loan 
certificates,  not  exceeding  $25,000,000  ;  said  certificates  to  bear 
interest  at  the  rate  of  3  per  centum  per  annum,  principal  and 
interest  payable  in  lawful  money  on  demand,  and  to  be  similar 
in  all  respects  to  the  certificates  authorized  by  the  act  .  .  . 
approved  March  2,  1867  ;  and  the  said  certificates  may  consti- 
tute and  be  held  by  any  national  bank  holding  or  owning  the 
same  as  a  part  of  the  reserve,  in  accordance  with  the  provisions 
of  the  above  mentioned  act  of  March  2,  1867. 

Act  of  February  19,  1869  —  To  prevent  loaning  money  upon 
United  States  notes 

Be  it  enacted,  etc.,  That  no  national  banking  association  shall 
hereafter  offer  or  receive  United  States  notes  or  national  bank 
notes  as  security  or  as  collateral  security  for  any  loan  of  money, 
or  for  a  consideration  shall  agree  to  withhold  the  same  from 
use,  or  shall  offer  to  receive  the  custody  or  promise  of  custody 
of  such  notes  as  security,  or  as  a  collateral  security,  or  consid- 
eration for  any  loan  of  money ;  and  any  national  banking  asso- 
ciation offending  against  the  provisions  of  this  act  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction  thereof 
in  any  United  States  court  having  jurisdiction  shall  be  punished 
by  a  fine  not  exceeding  $1000,  and  by  a  further  sum  equal  to 
one-third  of  the  money  so  loaned  ;  and  the  officer  or  officers  of 
said  bank  who  shall  make  such  loan  or  loans  shall  be  liable  for 
a  further  sum  equal  to  one-quarter  of  the  money  so  loaned  ;  and 
the  prosecution  of  such  offenders  shall  be  commenced  and  con- 
ducted as  provided  for  the  punishment  of  offences  in  an  act  to 
provide  a  national  currency,  approved  June  3,  1864,  and  the 
fine  or  penalty  so  recovered  shall  be  for  the  benefit  of  the  party 
bringing  such  suit. 

Act  of  March  3,  1869  —  Regulating  the  reports  of  national  bank- 
ing associations 

Be  it  enacted,  etc.,  That  in  lieu  of  all  reports  required  by  sec- 
tion 34  of  the  national  currency  act,  every  association  shall 
make  to  the  Comptroller  of  the  Currency,  not  less  than  five  re- 
ports during  each  and  every  year,  according  to  the  form  which 
may  be  prescribed  by  him,  verified  by  the  oath  or  affirmation 
of  the  president  or  cashier  of  such  association,  and  attested  by 
the  signature  of  at  least  three  of  the  directors  ;  which  report 
shall  exhibit,  in  detail  and  under  appropriate  heads,  the  resources 

2N 


546  CONTEST  FOR  SOUND  MONEY 

and  liabilities  of  the  association  at  the  close  of  business  on  any 
past  day  to  be  by  him  specified,  and  shall  transmit  such  report 
to  the  Comptroller  within  five  days  after  the  receipt  of  a  request 
or  requisition  therefor  from  him ;  and  the  report  of  each  associ- 
ation above  required,  in  the  same  form  in  which  it  is  made  to 
the  Comptroller,  shall  be  published  in  a  newspaper  published 
in  the  place  where  such  association  is  established,  or  if  there  be 
no  newspaper  in  the  place,  then  in  the  one  published  nearest 
thereto  in  the  same  county,  at  the  expense  of  the  association ; 
and  such  proof  of  publication  shall  be  furnished  as  may  be  re- 
quired by  the  Comptroller.  And  the  Comptroller  shall  have 
power  to  call  for  special  reports  from  any  particular  association 
whenever  in  his  judgment  the  same  shall  be  necessary  in  order 
to  a  full  and  complete  knowledge  of  its  condition.  Any  associ- 
ation failing  to  make  and  transmit  any  such  report  shall  be  sub- 
ject to  a  penalty  of  one  hundred  dollars  for  each  day  after  five 
days  that  such  bank  shall  delay  to  make  and  transmit  any  report 
as  aforesaid  ;  and  in  case  any  association  shall  delay  or  refuse  to 
pay  the  penalty  herein  imposed  when  the  same  shall  be  assessed 
by  the  Comptroller  of  the  Currency,  the  amount  of  such  penalty 
may  be  retained  by  the  Treasurer  of  the  United  States,  upon 
the  order  of  the  Comptroller  of  the  Currency,  out  of  the  inter- 
est, as  it  may  become  due  to  the  association,  on  the  bonds  de- 
posited with  him  to  secure  circulation ;  and  all  sums  of  money 
collected  for  penalties  under  this  section  shall  be  paid  into  the 
Treasury  of  the  United  States. 

Sec.  2.  That,  in  addition  to  said  reports,  each  national  bank- 
ing association  shall  report  to  the  Comptroller  of  the  Currency 
the  amount  of  each  dividend  declared  by  said  association,  and 
the  amount  of  net  earnings  in  excess  of  said  dividends,  which 
report  shall  be  made  within  ten  days  after  the  declaration  of 
each  dividend,  and  attested  by  the  oath  of  the  president  or 
cashier  of  said  association,  and  a  failure  to  comply  with  the 
provisions  of  this  section  shall  subject  such  association  to  the 
penalties  provided  in  the  foregoing  section. 

Act  of  March  3,  1869  —  In  reference  to  certifying  checks  by 
national  banks 

Be  it  enacted,  etc.,  That  it  shall  be  unlawful  for  any  officer, 
clerk,  or  agent  of  any  national  bank  to  certify  any  check  drawn 
upon  said  bank  unless  the  person  or  company  drawing  said 
check  shall  have  on  deposit  in  said  bank  at  the  time  such  check 
is  certified  an  amount  of  money  equal  to  the  amount  specified 
in  such  check ;  and  any  check  so  certified  by  duly  authorized 


APPENDIX 


547 


officers  shall  be  a  good  and  valid  obligation  against  such  bank ; 
and  any  officer,  clerk,  or  agent  of  any  national  bank  violating 
the  provisions  of  this  act  shall  subject  such  bank  to  the  liabilities 
and  proceedings  on  the  part  of  the  Comptroller  as  provided 
for  in  section  50  of  the  national  banking  law,  approved  June  3, 
1864. 

Act  of  March  18,  1869  —  To  strengthen  the  public  credit 

Be  it  enacted,  etc.,  That  in  order  to  remove  any  doubt  as  to 
the  purpose  of  the  government  to  discharge  all  just  obligations 
to  the  public  creditors,  and  to  settle  conflicting  questions  and 
interpretations  of  the  laws  by  virtue  of  which  such  obligations 
have  been  contracted,  it  is  hereby  provided  and  declared  that 
the  faith  of  the  United  States  is  solemnly  pledged  to  the  pay- 
ment in  coin  or  its  equivalent  of  all  the  obligations  of  the  United 
States  not  bearing  interest,  known  as  United  States  notes,  and 
of  all  the  interest-bearing  obligations  of  the  United  States, 
except  in  cases  where  the  law  authorizing  the  issue  of  any  such 
obligation  has  expressly  provided  that  the  same  may  be  paid 
in  lawful  money  or  other  currency  than  gold  and  silver.  But 
none  of  said  interest-bearing  obligations  not  already  due  shall 
be  redeemed  or  paid  before  maturity  unless  at  such  time  United 
States  notes  shall  be  convertible  into  coin  at  the  option  of  the 
holder,  or  unless  at  such  time  bonds  of  the  United  States  bear- 
ing a  lower  rate  of  interest  than  the  bonds  to  be  redeemed  can 
be  sold  at  par  in  coin.  And  the  United  States  also  solemnly 
pledges  its  faith  to  make  provision  at  the  earliest  practicable 
period  for  the  redemption  of  the  United  States  notes  in  coin. 

Act  of  July  12,  1870  —  To  provide  for  the  redemption  of  the  three 
per  cent,  temporary  loan  certificates,  and  for  an  increase 
of  national  bank  notes 

Be  it  enacted,  etc.,  That  $54;ooo,ooo  in  notes  for  circulation 
may  be  issued  to  national  banking  associations,  in  addition  to 
the  $300,000,000  authorized  by  the  2 2d  section  of  the  "Act 
to  provide  a  national  currency,  etc.,"  approved  June  3,  1864; 
and  the  amount  of  notes  so  provided  shall  be  furnished  to  bank- 
ing associations  organized,  or  to  be  organized,  in  those  states 
and  territories  having  less  than  their  proportion  under  the  appor- 
tionment contemplated  by  the  provisions  of  the  "  Act  to  amend 
an  act  to  provide  a  national  currency,  etc.,"  approved  March  3, 
1865,  and  the  bonds  deposited  with  the  Treasurer  of  the  United 
States,  to  secure  the  additional  circulating  notes  herein  author- 


548  CONTEST  FOR  SOUND  MONEY 

ized,  shall  be  of  any  description  of  bonds  of  the  United  States 
bearing  interest  in  coin ;  but  a  new  apportionment  of  the  in- 
creased circulation  herein  provided  for  shall  be  made  as  soon  as 
practicable,  based  upon  the  census  of  1870  :  Provided,  That  if 
applications  for  the  circulation  herein  authorized  shall  not  be 
made  within  one  year  after  the  passage  of  this  act  by  banking 
associations  organized,  or  to  be  organized,  in  States  having  less 
than  their  proportion,  it  shall  be  lawful  for  the  Comptroller  of 
the  Currency  to  issue  such  circulation  to  banking  associations 
applying  for  the  same  in  other  states  or  territories  having  less 
than  their  proportion,  giving  the  preference  to  such  as  have  the 
greatest  deficiency  : '  And  provided  further,  That  no  banking 
association  hereafter  organized  shall  have  a  circulation  in  excess 
of  $5  00,000  ? 

Sec.  2.  That  at  the  end  of  each  month  after  the  passage  of 
this  act,  it  shall  be  the  duty  of  the  Comptroller  of  the  Currency 
to  report  to  the  Secretary  of  the  Treasury  the  amount  of  circu- 
lating notes  issued,  under  the  provisions  of  the  preceding  sec- 
tion, to  national  banking  associations,  during  the  previous 
month  ;  whereupon  the  Secretary  of  the  Treasury  shall  redeem 
and  cancel  an  amount  of  three  per  centum  temporary  loan  cer- 
tificates issued  under  the  acts  of  March  2,  1867,  and  July  25, 
1868,  not  less  than  the  amount  of  circulating  notes  so  reported, 
and  may,  if  necessary,  in  order  to  procure  the  presentation  of 
such  temporary  loan  certificates  for  redemption,  give  notice 
to  the  holders  thereof,  by  publication  or  otherwise,  that  certain 
of  said  certificates  (which  shall  be  designated  by  number,  date, 
and  amount)  shall  cease  to  bear  interest  from  and  after  a  day 
to  be  designated  in  such  notice ;  and  that  the  certificates  so 
designated  shall  no  longer  be  available  as  any  portion  of  the 
lawful  money  reserve  in  possession  of  any  national  banking 
association ;  and,  after  the  day  designated  in  such  notice,  no 
interest  shall  be  paid  on  such  certificates,  and  they  shall  not 
thereafter  be  counted  as  a  part  of  the  reserve  of  any  banking 
association. 

Sec.  3.  That  upon  the  deposit  of  any  United  States  bonds, 
bearing  interest  payable  in  gold,  with  the  treasurer  of  the 
United  States,  in  the  manner  prescribed  in  the  19th  and  20th 
sections  of  the  national  currency  act,  it  shall  be  lawful  for  the 
comptroller  of  the  currency  to  issue  to  the  association  making 
the  same,  circulating  notes  of  different  denominations,  not  less 
than  $5,  not  exceeding  in  amount  80  per  centum  of  the  par 

1  All  these  regulations  for  the  distribution  of  bank  currency  were  re- 
pealed by  the  Act  of  January  14,  1875,  which  see. 

2  Repealed  by  Act  of  July  1 2,  1 882,  Sec.  10. 


APPENDIX  549 

value  of  the  bonds  deposited,  which  notes  shall  bear  upon  their 
face  the  promise  of  the  association  to  which  they  are  issued  to 
pay  them,  upon  presentation  at  the  office  of  the  association,  in 
gold  coin  of  the  United  States,1  and  shall  be  redeemable  upon 
such  presentation  in  such  coin  :  Provided,  That  no  banking 
association  organized  under  this  section  shall  have  a  circulation 
in  excess  of  $1,000,000. 

Sec.  4.  That  every  national  banking  association  formed  under 
the  provisions  of  the  preceding  section  of  this  act  shall  at  all 
times  keep  on  hand  not  less  than  25  per  centum  of  its  out- 
standing circulation  in  gold  or  silver  coin  of  the  United  States, 
and  shall  receive  at  par  in  the  payment  of  debts  the  gold  notes 
of  every  other  such  banking  association  which  at  the  time  of 
such  payments  shall  be  redeeming  its  circulating  notes  in  gold 
coin  of  the  United  States. 

Sec.  5.  That  every  association  organized  for  the  purpose  of 
issuing  gold  notes  as  provided  in  this  act  shall  be  subject  to  all 
the  requirements  and  provisions  of  the  national  currency  act, 
except  the  first  clause  of  section  22,  which  limits  the  circulation 
of  national  banking  associations  to  $300,000,000  ;  the  first  clause 
of  section  32,  which,  taken  in  connection  with  the  preceding 
section,  would  require  national  banking  associations  organized 
in  the  city  of  San  Francisco  to  redeem  their  circulating  notes 
at  par  in  the  city  of  New  York  ;  and  the  last  clause  of  section 
32,  which  requires  every  national  banking  association  to  receive 
in  payment  of  debts  the  notes  of  every  other  national  banking 
association  at  par :  Provided,  That  in  applying  the  provisions 
and  requirements  of  said  acts  to  the  banking  associations  herein 
provided  for,  the  terms  "  lawful  money,"  and  "  lawful  money  of 
the  United  States,"  shall  be  held  and  construed  to  mean  gold 
or  silver  coin  of  the  United  States. 

Sec.  6.  That  to  secure  a  more  equitable  distribution  of  the 
national  banking  currency  there  may  be  issued  circulating  notes 
to  banking  associations  organized  in  States  and  Territories 
having  less  than  their  proportion  as  herein  set  forth.  And  the 
amount  of  circulation  in  this  section  authorized  shall,  under  the 
direction  of  the  Secretary  of  the  Treasury,  as  it  may  be  required 
for  this  purpose,  be  withdrawn,  as  herein  provided,  from  bank- 
ing associations  organized  in  States  having  a  circulation  exceed- 
ing that  provided  for  by  the  act  entitled  "  An  act  to  amend  an 
act  entitled  '  An  act  to  provide  for  a  national  banking  currency, 

1  The  provisions  of  this  act  for  national  gold  banks  were  modified  by 
the  Act  of  January  19,  1875,  and  practically  repealed  by  the  Act  of  Febru- 
ary 14,  1880,  resumption  of  specie  payments  having  obviated  the  need  for 
a  distinction. 


550  CONTEST  FOR  SOUND  MONEY 

etc.,' "  approved  March  3,  1865,  but  the  amount  so  withdrawn 
shall  not  exceed  $  2  5, 000,000.  The  comptroller  of  the  currency 
shall,  under  the  direction  of  the  Secretary  of  the  Treasury,  make 
a  statement  showing  the  amount  of  circulation  in  each  State  and 
Territory,  and  the  amount  to  be  retired  by  each  banking  asso- 
ciation in  accordance  with  this  section,  and  shall,  when  such 
redistribution  of  circulation  is  required,  make  a  requisition  for 
such  amount  upon  such  banks,  commencing  with  the  banks 
having  a  circulation  exceeding  $1,000,000  in  States  having  an 
excess  of  circulation,  and  withdrawing  their  circulation  in  excess 
of  $1,000,000,  and  then  proceeding  pro-rata  with  other  banks 
having  a  circulation  of  $300,000  in  States  having  the  largest 
excess  of  circulation,  and  reducing  the  circulation  of  such  banks 
in  States  having  the  greatest  proportion  in  excess,  leaving  un- 
disturbed the  banks  in  States  having  a  smaller  proportion,  until 
those  in  greater  excess  have  been  reduced  to  the  same  grade, 
and  continuing  thus  to  make  the  reduction  provided  for  by  this 
act  until  the  full  amount  of  $25,000,000,  herein  provided  for, 
shall  be  withdrawn  ;  and  the  circulation  so  withdrawn  shall  be 
distributed  along  the  States  and  Territories  having  less  than 
their  proportion,  so  as  to  equalize  the  same.  And  it  shall  be 
the  duty  of  the  comptroller  of  the  currency,  under  the  direction 
of  the  Secretary  of  the  Treasury,  forthwith  to  make  a  requisition 
for  the  amount  thereof  upon  the  banks  above  indicated  as  herein 
prescribed.  And  upon  failure  of  such  associations,  or  any  of 
them,  to  return  the  amount  so  required  within  one  year,  it  shall 
be  the  duty  of  the  comptroller  of  the  currency  to  sell  at  public 
auction,  having  given  twenty  days'  notice  thereof  in  one  daily 
newspaper  printed  in  Washington  and  one  in  New  York  city, 
an  amount  of  bonds  deposited  by  said  association,  as  security 
for  said  circulation,  equal  to  the  circulation  to  be  withdrawn 
from  said  association  and  not  returned  in  compliance  with  such 
requisition ;  and  the  comptroller  of  the  currency  shall  with  the 
proceeds  redeem  so  many  of  the  notes  of  said  banking  asso- 
ciation, as  they  come  into  the  treasury,  as  will  equal  the  amount 
required  and  not  so  returned,  and  shall  pay  the  balance,  if  any, 
to  such  banking  association  :  Provided,  That  no  circulation  shall 
be  withdrawn  under  the  provisions  of  this  section  until  after  the 
$54,000,000  granted  in  the  first  section  shall  have  been  taken  up. 
Sec.  7.  That  after  the  expiration  of  six  months  from  the 
passage  of  this  act  any  banking  association  located  in  any  State 
having  more  than  its  proportion  of  circulation,  may  be  removed 
to  any  State  having  less  than  its  proportion  of  circulation,  under 
such  rules  and  regulations  as  the  comptroller  of  the  currency, 
with  the  approval  of  the  Secretary  of  the  Treasury,  may  require  : 


APPENDIX  551 

Provided,  That  the  amount  of  the  issue  of  said  banks  shall  not  be 
deducted  from  the  amount  of  new  issue  provided  for  in  this  issue. 

Act  of  July  14,  1870 — To  require  national  banks  going  into 
liquidation  to  retire  their  circulating  notes 

Be  it  enacted,  etc.,  That  every  bank  that  has  heretofore  gone 
into  liquidation  under  the  provisions  of  section  42  of  the  na- 
tional currency  act,  shall  be  required  to  deposit  lawful  money 
of  the  United  States  for  its  outstanding  circulation  within  60 
days  from  the  date  of  the  passage  of  this  act.  And  every  bank 
that  may  hereafter  go  into  liquidation  shall  be  required  to 
deposit  lawful  money  of  the  United  States  for  its  outstanding 
circulation  within  6  months  from  the  date  of  the  vote  to  go  into 
liquidation;  whereupon  the  bonds  pledged  as  security  for  such 
circulation  shall  be  surrendered  to  the  association  making  such 
deposit.  And  if  any  bank  shall  fail  to  make  the  deposit  and 
take  up  its  bonds  for  30  days  after  the  expiration  of  the  time 
specified,  the  Comptroller  of  the  Currency  shall  have  power  to 
sell  the  bonds  pledged  for  the  circulation  of  said  bank  at  public 
auction  in  New  York  City,  and  after  providing  for  the  redemp- 
tion and  cancellation  of  said  circulation,  and  the  necessary  ex- 
penses of  the  sale,  to  pay  over  any  balance  remaining  from  the 
proceeds  to  the  bank,  or  its  legal  representative  :  Provided, 
That  banks  which  are  winding  up  in  good  faith  for  the  purpose 
of  consolidating  with  other  banks  shall  be  exempt  from  the  pro- 
visions of  this  act :  And  provided  further,  That  the  assets  and 
liabilities  of  banks  so  in  liquidation  shall  be  reported  by  the 
banks  with  which  they  are  in  process  of  consolidation. 

Act  of  July    14,   1870 — To  authorize  the  refunding  of  the 
national  debt 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is 
hereby  authorized  to  issue,  in  a  sum  or  sums  not  exceeding  in 
the  aggregate  $200,000,000,  coupon  or  registered  bonds  of  the 
United  States,  in  such  form  as  he  may  prescribe,  and  of  de- 
nominations of  $50,  or  some  multiple  of  that  sum,  redeemable 
in  coin  of  the  present  standard  value,  at  the  pleasure  of  the 
United  States,  after  10  years  from  the  date  of  their  issue,  and 
bearing  interest,  payable  semi-annually  in  such  coin,  at  the  rate 
of  5  per  cent,  per  annum  ;  also  a  sum  or  sums  not  exceeding 
in  the  aggregate  $300,000,000  of  like  bonds,  the  same  in  all 
respects,  but  payable  at  the  pleasure  of  the  United  States,  after 
15  years  from  the   date   of  their  issue,  and  bearing   interest 


552  CONTEST  FOR  SOUND  MONEY 

at  the  rate  of  4^  per  cent,  per  annum ;  also  a  sum  or  sums  not 
exceeding  in  the  aggregate  $1,000,000,000  of  like  bonds,  the 
same  in  all  respects,  but  payable  at  the  pleasure  of  the  United 
States,  after  30  years  from  the  date  of  their  issue,  and  bearing 
interest  at  the  rate  of  4  per  cent,  per  annum ;  all  of  which 
said  several  classes  of  bonds  and  the  interest  thereon  shall  be 
exempt  from  the  payment  of  all  taxes  or  duties  of  the  United 
States,  as  well  as  from  taxation  in  any  form  by  or  under  State, 
municipal,  or  local  authority ;  and  the  said  bonds  shall  have 
set  forth  and  expressed  upon  their  face  the  above  specified 
conditions,  and  shall,  with  their  coupons,  be  made  payable  at 
the  Treasury  of  the  United  States.  But  nothing  in  this  act,  or 
in  any  other  law  now  in  force,  shall  be  construed  to  authorize 
any  increase  whatever  of  the  bonded  debt  of  the  United  States. 


Act  of  June  8,  1872  — For  the  better  security  of  bank  reserves, 
and  to  facilitate  bank  clearing-house  exchanges 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is 
hereby  authorized  to  receive  United  States  notes  on  deposit, 
without  interest,  from  national  banking  associations,  in  sums 
not  less  than  $10,000,  and  to  issue  certificates  therefor  in  such 
form  as  the  Secretary  may  prescribe,  in  denominations  of  not 
less  than  $5000 ;  which  certificates  shall  be  payable  on  demand 
in  United  States  notes,  at  the  place  where  the  deposits  were  made. 

Sec.  2.  That  the  United  States  notes  so  deposited  in  the 
Treasury  of  the  United  States  shall  not  be  counted  as  part  of 
the  legal  reserve ;  but  the  certificates  issued  therefor  may  be 
held  and  counted  by  national  banks  as  part  of  their  legal  reserve, 
and  may  be  accepted  in  the  settlement  of  clearing-house 
balances  at  the  places  where  the  deposits  therefor  were  made. 

Sec.  3.  That  nothing  contained  in  this  act  shall  be  construed 
to  authorize  any  expansion  or  contraction  of  the  currency  and 
the  United  States  notes  for  which  such  certificates  are  issued, 
or  other  United  States  notes  of  like  amount,  shall  be  held 
as  special  deposits  in  the  Treasury,  and  used  only  for  the 
redemption  of  such  certificates. 

Act  of  February  12,  1873  —  Revising  and  amending  the  laws 
relative  to  the  Mints,  assay-offices,  and  coinage  of  the 
United  States 

[This  act  contains  67  sections.  Those  omitted  refer  to  the 
organization  and  the  technical  operation  of  the  mint  service, 
to  minor  coin,  counterfeiting,  etc.] 


APPENDIX  553 

Sec.  13.  That  the  standard  for  both  gold  and  silver  coins 
of  the  United  States  shall  be  such  that  of  1000  parts  by  weight 
900  shall  be  of  pure  metal  and  100  of  alloy;  and  the  alloy  of 
the  silver  coins  shall  be  of  copper,  and  the  alloy  of  the  gold  coins 
shall  be  of  copper,  or  of  copper  and  silver ;  but  the  silver  shall 
in  no  case  exceed  one-tenth  of  the  whole  alloy. 

Sec.  14.  That  the  gold  coins  of  the  United  States  shall  be  a 
$1  piece,  which,  at  the  standard  weight  of  25T8T  grains,  shall 
be  the  unit  of  value  ;  a  quarter-eagle,  or  %2\  piece  ;  a  $3  piece ; 
a  half-eagle,  or  $5  piece  ;  an  eagle,  or  #10  piece  ;  and  a  double- 
eagle,  or  $20  piece.  And  the  standard  weight  of  the  gold  dollar 
shall  be  25^  grains ;  of  the  quarter-eagle,  or  $z\  piece,  64^ 
grains;  of  the  $3  piece,  77^  grains;  of  the  half-eagle,  or  $5 
piece,  129  grains ;  of  the  eagle,  or  $10  piece,  258  grains  ;  of  the 
double-eagle,  or  $20  piece,  516  grains;  which  coins  shall  be  a 
legal  tender  in  all  payments  at  their  nominal  value  when  not 
below  the  standard  weight  and  limit  of  tolerance  provided  in 
this  act  for  the  single  piece,  and  when  reduced  in  weight,  below 
said  standard  and  tolerance,  shall  be  a  legal  tender  at  valuation 
in  proportion  to  their  actual  weight ;  and  any  gold  coin  of  the 
United  States,  if  reduced  in  weight  by  natural  abrasion  not  more 
than  one-half  of  one  per  centum  below  the  standard  weight  pre- 
scribed by  law,  after  a  circulation  of  20  years,  as  shown  by  its 
date  of  coinage,  and  at  a  ratable  proportion  for  any  period  less 
than  20  years,  shall  be  received  at  their  nominal  value  by  the 
United  States  Treasury  and  its  offices,  under  such  regulations  as 
the  Secretary  of  the  Treasury  may  prescribe  for  the  protection 
of  the  Government  against  fraudulent  abrasion  or  other  prac- 
tices ;  and  any  gold  coins  in  the  Treasury  of  the  United  States 
reduced  in  weight  below  this  limit  of  abrasion  shall  be  recoined. 

Sec.  15.  That  the  silver  coins  of  the  United  States  shall  be 
a  trade-dollar,  a  half-dollar,  or  50-cent  piece,  a  quarter-dollar, 
or  25-cent  piece,  a  dime,  or  10-cent  piece;  and  the  weight  of 
the  trade-dollar  shall  be  420  grains  troy  ;  the  weight  of  the  half- 
dollar  shall  be  12^  grams  (grammes);  the  quarter-dollar  and 
the  dime  shall  be,  respectively,  one-half  and  one-fifth  of  the 
weight  of  said  half-dollar;  and  said  coins  shall  be  a  legal 
tender  at  their  nominal  value  for  any  amount  not  exceed- 
ing $5  in  any  one  payment.1 

Sec.  1 7.  That  no  coins,  either  of  gold,  silver,  or  minor  coin- 
age, shall  hereafter  be  issued  from  the  mint  other  than  those  of 
the  denominations,  standards,  and  weights  herein  set  forth. 

Sec.  20.  That  any  owner  of  gold  bullion  may  deposit  the 
same  at  any  mint,  to  be  formed  into  coin  or  bars  for  his  benefit : 
1  Changed  to  #10  by  the  Act  of  June  9,  1879.  . 


554  CONTEST  FOR  SOUND  MONEY 

but  it  shall  be  lawful  to  refuse  any  deposit  of  less  value  than  $100, 
or  any  bullion  so  base  as  to  be  unsuitable  for  the  operations  of 
the  mint ;  and  when  gold  and  silver  are  combined,  if  either 
metal  be  in  such  small  proportion  that  it  cannot  be  separated 
advantageously,  no  allowance  shall  be  made  to  the  depositor 
for  its  value. 

Sec.  21.  That  any  owner  of  silver  bullion  may  deposit  the 
same  at  any  mint,  to  be  formed  into  bars,  or  into  dollars  of  the 
weight  of  420  grains,  troy,  designated  in  this  act  as  trade- 
dollars,  and  no  deposit  of  silver  for  other  coinage  shall  be 
received;  but  silver  bullion  contained  in  gold  deposits,  and 
separated  therefrom,  may  be  paid  for  in  silver  coin,  at  such 
valuation  as  may  be,  from  time  to  time,  established  by  the 
Director  of  the  Mint. 

[Sec.  25  fixes  a  charge  of  \  of  one  per  cent,  for  gold  coin- 
age.   This  was  abrogated  by  the  act  of  January  14,  1875.] 

Act  of  March  3,  1873  —  To  establish  the  custom-house  value 
of  the  sovereign  or  pound  sterling  of  Great  Britain,  and 
to  fix  the  par  of  exchange 

Be  it  enacted,  etc.,  That  the  value  of  foreign  coin  as  expressed 
in  the  money  of  account  of  the  United  States  shall  be  that  of 
the  pure  metal  of  such  coin  of  standard  value ;  and  the  values 
of  the  standard  coins  in  circulation  of  the  various  nations  of  the 
world  shall  be  estimated  annually  by  the  Director  of  the  Mint, 
and  be  proclaimed  on  the  first  day  of  January  by  the  Secretary 
of  the  Treasury. 

Sec.  2.  That  in  all  payments  by  or  to  the  Treasury,  whether 
made  here  or  in  foreign  countries,  where  it  becomes  necessary 
to  compute  the  value  of  the  sovereign  or  pound  sterling,  it  shall 
be  deemed  equal  to  $4.8665,  and  the  same  rule  shall  be  applied 
in  appraising  merchandise  imported  where  the  value  is,  by  the 
invoice,  in  sovereigns  or  pounds  sterling,  and  in  the  construction 
of  contracts  payable  in  sovereigns  or  pounds  sterling ;  and  this 
valuation  shall  be  the  par  of  exchange  between  Great  Britain 
and  the  United  States;  and  all  contracts  made  after  the  first 
day  of  January,  1874,  based  on  an  assumed  par  of  exchange 
with  Great  Britain  of  54  pence  to  the  dollar,  or  $4.44^  to  the 
sovereign  or  pound  sterling,  shall  be  null  and  void. 

Act  of  March  3,  1873 — To  require  national  banks  to  restore 
their  capital  when  impaired,  and  to  amend  the  national- 
currency  act 

Be  it  enacted,  etc.,  That  all  national  banks  which  shall  have 
failed  to  pay  up  their  capital  stock,  as  required  by  law,  and  all 


APPENDIX  555 

national  banks  whose  capital  stock  shall  have  become  impaired 
by  losses  or  otherwise,  shall,  within  3  months  after  receiving 
notice  thereof  from  the  Comptroller  of  the  Currency,  be  re- 
quired to  pay  the  deficiency  in  the  capital  stock  by  assessment 
upon  the  shareholders,  pro  rata,  for  the  amount  of  capital  stock 
held  by  each  and  the  Treasurer  of  the  United  States  shall 
withhold  the  interest  upon  all  bonds  held  by  him  in  trust  for 
such  association,  upon  notification  from  the  Comptroller  of  the 
Currency,  until  otherwise  notified  by  him ;  and  if  such  banks 
shall  fail  to  pay  up  their  capital  stock,  and  shall  refuse  to  go 
into  liquidation,  as  provided  by  law,  for  3  months  after  receiv- 
ing notice  from  the  Comptroller,  a  receiver  may  be  appointed 
to  close  up  the  business  of  the  association,  according  to  the 
provisions  of  the  50th  section  of  the  national- currency  act. 

Sec.  2.  That  section  57  of  said  act  be  amended  by  adding 
thereto  the  following  :  "  And  provided further,  That  no  attach- 
ment, injunction,  or  execution  shall  be  issued  against  such 
association,  or  its  property,  before  final  judgment  in  any  such 
suit,  action,  or  proceeding  in  any  State,  county,  or  municipal 
court." 

Sec.  3.  That  all  banks  not  organized,  and  transacting  business 
under  the  national-currency  act,  and  all  persons,  companies  or 
corporations  doing  the  business  of  bankers,  brokers,  or  savings 
institutions,  except  saving-banks,  authorized  by  Congress  to  use 
the  word  "  national "  as  a  part  of  their  corporate  names  are 
prohibited  from  using  the  word  "  national "  as  a  portion  of  the 
name  or  title  of  such  bank,  corporation,  firm,  or  partnership ; 
and  every  such  bank,  corporation,  or  firm,  which  shall  use  the 
word  "  national  "  as  a  portion  of  their  corporate  title  or  partner- 
ship name  6  months  after  the  passage  of  this  act,  shall  be  subject 
to  a  penalty  of  $50  for  each  day  thereafter  in  which  said  word 
shall  be  employed  as  aforesaid  as  part  of  such  corporate  name 
or  title,  such  penalty  to  be  recovered  by  action  in  any  court 
having  jurisdiction. 

Sec.  4.  That  it  shall  be  the  duty  of  the  Comptroller  of  the 
Currency  to  cause  to  be  examined  each  year  the  plates,  dies, 
but-pieces,  and  other  material  from  which  the  national-bank  cir- 
culation is  printed  in  whole  or  in  part,  and  file  in  his  office 
annually  a  correct  list  of  the  same ;  and  such  material  as  shall 
have  been  used  in  the  printing  of  the  notes  of  national  banks 
which  are  in  liquidation,  or  have  closed  business,  shall  be  de- 
stroyed under  such  regulations  as  shall  be  prescribed  by  the 
Comptroller  of  the  Currency,  and  approved  by  the  Secretary 
of  the  Treasury ;  and  the  expense  of  such  examination  and 
destruction  shall  be  paid  out  of  any  appropriation  made   by 


556  CONTEST  FOR  SOUND  MONEY 

Congress  for  the  special  examination  of  national  banks  and 
bank  plates. 

Act  of  June  20, 1874 — Fixing  the  amount  of  United  States  notes, 
providing  for  a  redistribution  of  the  national-bank  cur- 
rency, and  for  other  purposes 

Be  it  enacted,  etc.,  That  the  act  entitled  "  An  act  to  provide  a 
national  currency,  etc.,"  approved  June  3d,  1864,  shall  hereafter 
be  known  as  "  The  national-bank  act." 

Sec.  2.  That  section  31  of  "The  national-bank  act"  be  so 
amended  that  the  several  associations  therein  provided  for  shall 
not  hereafter  be  required  to  keep  on  hand  any  amount  of  money 
whatever,  by  reason  of  the  amount  of  their  respective  circula- 
tions ;  but  the  moneys  required  by  said  section  to  be  kept  at 
all  times  on  hand  shall  be  determined  by  the  amount  of  deposits 
in  all  respects,  as  provided  for  in  the  said  section. 

Sec.  3.  That  every  association  organized,  or  to  be  organized, 
under  the  provisions  of  the  said  act,  and  of  the  several  acts 
amendatory  thereof,  shall  at  all  times  keep  and  have  on  deposit 
in  the  Treasury  of  the  United  States,  in  lawful  money  of  the 
United  States,  a  sum  equal  to  5  per  centum  of  its  circulation, 
to  be  held  and  used  for  the  redemption  of  such  circulation ; 
which  sum  shall  be  counted  as  part  of  its  lawful  reserve,  as  pro- 
vided in  section  2  of  this  act;  and  when  the  circulating  notes 
of  any  such  associations,  assorted  or  unassorted,  shall  be  pre- 
sented for  redemption,  in  sums  of  $1,000  or  any  multiple  thereof, 
to  the  Treasurer  of  the  United  States,  the  same  shall  be  re- 
deemed in  United  States  notes.  All  notes  so  redeemed  shall 
be  charged  by  the  Treasurer  of  the  United  States  to  the  respec- 
tive associations  issuing  the  same,  and  he  shall  notify  them 
severally,  on  the  first  day  of  each  month,  or  oftener,  at  his  dis- 
cretion, of  the  amount  of  such  redemptions  ;  and  whenever 
such  redemptions  for  any  association  shall  amount  to  the  sum 
of  $500,  such  association  so  notified  shall  forthwith  deposit  with 
the  Treasurer  of  the  United  States  a  sum  in  United  States  notes 
equal  to  the  amount  of  its  circulating  notes  so  redeemed.  And 
all  notes  of  national  banks  worn,  defaced,  mutilated,  or  other- 
wise unfit  for  circulation,  shall,  when  received  by  any  assistant 
treasurer,  or  at  any  designated  depository  of  the  United  States, 
be  forwarded  to  the  Treasurer  of  the  United  States  for  redemp- 
tion as  provided  herein.  And  when  such  redemptions  have 
been  so  re-imbursed,  the  circulating-notes  so  redeemed  shall 
be  forwarded  to  the  respective  associations  by  which  they  were 
issued ;  bu':  if  any  of  such  notes  are  worn,  mutilated,  defaced, 


APPENDIX  557 

or  rendered  otherwise  unfit  for  use,  they  shall  be  forwarded  to 
the  Comptroller  of  the  Currency  and  destroyed  and  replaced 
as  now  provided  by  law  :  Provided,  That  each  of  said  associa- 
tions shall  re-imburse  to  the  Treasury  the  charges  for  transporta- 
tion,1 and  the  cost  for  assorting  such  notes  ;  and  the  associations 
hereafter  organized  shall  also  severally  re-imburse  to  the  Treas- 
ury the  cost  of  engraving  such  plates  as  shall  be  ordered  by 
each  association  respectively ;  and  the  amount  assessed  upon 
each  association  shall  be  in  proportion  to  the  circulation  re- 
deemed, and  be  charged  to  the  fund  on  deposit  with  the 
Treasurer:  And  provided  further,  That  so  much  of  section  32 
of  said  national  bank  act  requiring  or  permitting  the  redemption 
of  its  circulating  notes  elsewhere  than  at  its  own  counter  except 
as  provided  for  in  this  section,  is  hereby  repealed. 

Sec.  4.  That  any  association  organized  under  this  act,  or  any 
of  the  acts  of  which  this  is  an  amendment,  desiring  to  withdraw 
its  circulating  notes,2  in  whole  or  in  part,  may,  upon  the  deposit 
of  lawful  money  with  the  Treasurer  of  the  United  States  in 
sums  of  not  less  than  $9,000,  take  up  the  bonds  which  said 
association  has  on  deposit  with  the  Treasurer  for  the  security 
of  such  circulating  notes  ;  which  bonds  shall  be  assigned  to  the 
bank  in  the  manner  specified  in  the  nineteenth  section  of  the 
national-bank  act ;  and  the  outstanding  notes  of  said  associa- 
tion, to  an  amount  equal  to  the  legal- tender  notes  deposited, 
shall  be  redeemed  at  the  Treasury  of  the  United  States,  and 
destroyed  as  now  provided  by  law  :  Provided,  That  the  amount 
of  the  bonds  on  deposit  for  circulation  shall  not  be  reduced 
below  $50,000. 

Sec.  5.  That  the  Comptroller  of  the  Currency  shall,  under 
such  rules  and  regulations  as  the  Secretary  of  the  Treasury 
may  prescribe,  cause  the  charter-numbers  of  the  associations 
to  be  printed  upon  all  national-bank  notes  which  may  be  here- 
after issued  by  him. 

Sec.  6.  That  the  amount  of  United  States  notes  outstanding 
and  to  be  used  as  a  part  of  the  circulating- medium  shall  not 
exceed  the  sum  of  $382,000,000,  which  said  sum  shall  appear 
in  each  monthly  statement  of  the  public  debt,  and  no  part 
thereof  shall  be  held  or  used  as  a  reserve. 

Sec.  7.  That  so  much  of  the  act  entitled  "An  act  to  pro- 
vide for  the  redemption  of  the  3  per  centum  temporary  loan 
certificates,  and  for  an  increase  of  national-bank  notes,"  as 
provides  that  no  circulation  shall  be  withdrawn  under  the  pro- 
visions  of  section  6  of  said  act,  until  after  the  $54,000,000 

1  See  Act  of  July  12,  1882,  Sec.  8. 

2  See  Act  of  July  12,  1882,  Sec.  9. 


558  CONTEST  FOR  SOUND  MONEY 

granted  in  section  i  of  said  act  shall  have  been  taken  up,  is 
hereby  repealed  ;  and  it  shall  be  the  duty  of  the  Comptroller 
of  the  Currency,  under  the  direction  of  the  Secretary  of  the 
Treasury,  to  proceed  forthwith,  and  he  is  hereby  authorized 
and  required,  from  time  to  time,  as  applications  shall  be  duly 
made  therefor,  and  until  the  full  amount  of  $55,000,000  shall 
be  withdrawn,  to  make  requisitions  upon  each  of  the  national 
banks  described  in  said  section,  and  in  the  manner  therein 
provided,  organized  in  States  having  an  excess  of  circulation, 
to  withdraw  and  return  so  much  of  their  circulation  as  by  said 
act  may  be  apportioned  to  be  withdrawn  from  them,  or,  in  lieu 
thereof,  to  deposit  in  the  Treasury  of  the  United  States  lawful 
money  sufficient  to  redeem  such  circulation,  and  upon  the  re- 
turn of  the  circulation  required,  or  the  deposit  of  lawful  money, 
as  herein  provided,  a  proportionate  amount  of  the  bonds  held 
to  secure  the  circulation  of  such  association  as  shall  make  such 
return  or  deposit  shall  be  surrendered  to  it. 

Sec.  8.  That  upon  the  failure  of  the  national  banks  upon 
which  requisition  for  circulation  shall  be  made,  or  of  any  of 
them,  to  return  the  amount  required,  or  to  deposit  in  the 
Treasury  lawful  money  to  redeem  the  circulation  required, 
within  30  days,  the  Comptroller  of  the  Currency  shall  at  once 
sell,  as  provided  in  section  49  of  the  national  currency  act,  ap- 
proved June  3,  1864,  bonds  held  to  secure  the  redemption  of 
the  circulation  of  the  association  or  associations  which  shall  so 
fail,  to  an  amount  sufficient  to  redeem  the  circulation  required 
of  such  association  or  associations,  and  with  the  proceeds, 
which  shall  be  deposited  in  the  Treasury  of  the  United  States, 
so  much  of  the  circulation  of  such  association  or  associations 
shall  be  redeemed  as  will  equal  the  amount  required  and  not 
returned  and  if  there  be  any  excess  of  proceeds  over  the 
amount  required  for  such  redemption,  it  shall  be  returned  to 
the  association  or  associations  whose  bonds  shall  have  been 
sold.  And  it  shall  be  the  duty  of  the  Treasurer,  assistant 
treasurers,  designated  depositaries,  and  national  bank  deposita- 
ries of  the  United  States,  who  shall  be  kept  informed  by  the 
Comptroller  of  the  Currency  of  such  associations  as  shall  fail 
to  return  circulation  as  required,  to  assort  and  return  to  the 
Treasury  for  redemption  the  notes  of  such  associations  as  shall 
come  into  their  hands  until  the  amount  required  shall  be 
redeemed,  and  in  like  manner  to  assort  and  return  to  the 
Treasury,  for  redemption,  the  notes  of  such  national  banks  as 
have  failed,  or  gone  into  voluntary  liquidation  for  the  purpose 
of  winding  up  their  affairs,  and  of  such  as  shall  hereafter  so  fail 
or  go  into  liquidation. 


APPENDIX  559 

Sec.  9.  That  from  and  after  the  passage  of  this  act  it  shall 
be  lawful  for  the  Comptroller  of  the  Currency,  and  he  is  hereby 
required,  to  issue  circulating-notes  without  delay,  as  applica- 
tions therefor  are  made,  not  to  exceed  the  sum  of  $55,000,000, 
to  associations  organized,  or  to  be  organized,  in  those  States 
and  Territories  having  less  than  their  proportion  of  circulation, 
under  an  apportionment  made  on  the  basis  of  population  and 
of  wealth,  as  shown  by  the  returns  of  the  census  of  1870 ;  and 
every  association  hereafter  organized  shall  be  subject  to,  and  be 
governed  by,  the  rules,  restrictions,  and  limitations,  and  pos- 
sess the  rights,  privileges,  and  franchises,  now  or  hereafter  to 
be  prescribed  by  law  as  to  national  banking  associations, 
with  the  same  power  to  amend,  alter,  and  repeal  provided  by 
"  the  national  bank  act  "  :  Provided,  That  the  whole  amount  of 
circulation  withdrawn  and  redeemed  from  banks  transacting 
business  shall  not  exceed  $55,000,000,  and  that  such  circula- 
tion shall  be  withdrawn  and  redeemed  as  it  shall  be  necessary 
to  supply  the  circulation  previously  issued  to  the  banks  in  those 
States  having  less  than  their  apportionment :  And  provided 
further,  That  not  more  than  $30,000,000  shall  be  withdrawn 
and  redeemed  as  herein  contemplated  during  the  fiscal  year 
ending  June  30,  1875.1 

Act  of  June  23,  1874.  —  \Sundry  civil  appropriation  Law.] 

For  the  maceration  of  national-bank  notes,  United  States 
notes,  and  other  obligations  of  the  United  States  authorized  to 
be  destroyed,  $10,000;  and  that  all  such  issues  hereafter  de- 
stroyed may  be  destroyed  by  maceration  instead  of  burning  to 
ashes,  as  now  provided  by  law ;  and  that  so  much  of  sections 
24  and  43  of  the  national  currency  act  as  requires  national- 
bank  notes  to  be  burned  to  ashes  is  hereby  repealed. 

Act  of  January  14,  1875  —  ^°  provide  for  the  resumption  of 
specie  payments 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is 
hereby  authorized  and  required,  as  rapidly  as  practicable,  to 
cause  to  be  coined,  at  the  mints  of  the  United  States,  silver 
coins  of  the  denominations  of  10,  25,  and  50  cents,  of  standard 
value,  and  to  issue  them  in  redemption  of  an  equal  number 
and  amount  of  fractional  currency  of  similar  denominations, 
or,  at  his  discretion,  he  may  issue  such  silver  coins  through  the 

1  Superseded  by  the  Act  of  January  14,  1875. 


560  CONTEST  FOR  SOUND  MONEY 

mints,  the  sub-treasuries,  public  depositaries,  and  post-offices 
of  the  United  States ;  and,  upon  such  issue,  he  is  hereby  au- 
thorized and  required  to  redeem  an  equal  amount  of  such  frac- 
tional currency,  until  the  whole  amount  of  such  fractional 
currency  outstanding  shall  be  redeemed.1 

Sec.  2.  That  so  much  of  section  3524  of  the  Revised  Stat- 
utes 2  of  the  United  States  as  provides  for  a  charge  of  one-fifth 
of  one  per  centum  for  converting  standard  gold  bullion  into 
coin  is  hereby  repealed,  and  hereafter  no  charge  shall  be  made 
for  that  service. 

Sec.  3.  That  section  5177  of  the  Revised  Statutes  of  the 
United  States,  limiting  the  aggregate  amount  of  circulating- 
notes  of  national-banking  associations  be,  and  is  hereby,  re- 
pealed ;  and  each  existing  banking-association  may  increase  its 
circulating-notes  in  accordance  with  existing  law  without  re- 
spectto  said  aggregate  limit;  and  new  banking-associations  may 
be  organized  in  accordance  with  existing  law  without  respect  to 
said  aggregate  limit;  and  the  provisions  of  law  for  the  withdrawal 
and  redistribution  of  national-bank  currency  among  the  sev- 
eral States  and  Territories  are  hereby  repealed.  And  when- 
ever, and  so  often,  as  circulating-notes  shall  be  issued  to  any 
such  banking-association,  so  increasing  its  capital  or  circulat- 
ing-notes, or  so  newly  organized  as  aforesaid,  it  shall  be  the 
duty  of  the  Secretary  of  the  Treasury  to  redeem  the  legal- 
tender  United  States  notes  in  excess  only  of  $300,000,000, 
to  the  amount  of  80  per  centum  of  the  sum  of  national  bank- 
notes so  issued  to  any  such  banking-association  as  aforesaid 
and  to  continue  such  redemption  as  such  circulating-notes  are 
issued  until  there  shall  be  outstanding  the  sum  of  $300,000,000 
of  such  legal-tender  United  States  notes,3  and  no  more.  And 
on  and  after  the  first  day  of  January,  anno  Domini,  1879,  the 
Secretary  of  the  Treasury  shall  redeem,  in  coin,4  the  United 
States  legal-tender  notes  then  outstanding,  on  their  presenta- 
tion for  redemption,  at  the  office  of  the  assistant  treasurer  of 
the  United  States  in  the  city  of  New  York,5  in  sums  not  less 
than  $50.  And  to  enable  the  Secretary  of  the  Treasury  to 
prepare  and  provide  for  the  redemption  in  this  act  author- 

1  See  the  Act  of  April  17,  1876,  making  further  provision  for  issue  of 
silver  coin  in  lieu  of  fractional  currency. 

2  Act  of  February  12,  1873. 

8  Subsequent  Act  of  May  31,  1878,  forbade  further  retirement  of  legal- 
tender  notes,  and  fixed  the  limit  at  amount  then  outstanding,  $346,681,016. 

4  See  Sec.  2  of  the  Act  of  March  14,  1900,  making  these  notes  re- 
deemable in  gold. 

6  San  Francisco  added  by  Sec.  3  of  Act  of  March  3,  1887. 


APPENDIX  561 

ized  or  required,  he  is  authorized  to  use  any  surplus  revenues, 
from  time  to  time,  in  the  Treasury  not  otherwise  appropriated, 
and  to  issue,  sell,  and  dispose  of,  at  not  less  than  par,  in  coin, 
either  of  the  descriptions  of  bonds  of  the  United  States  de- 
scribed in  the  act  of  Congress  approved  July  14, 1870,  entitled 
"  An  act  to  authorize  the  refunding  of  the  national  debt," 
with  like  qualities,  privileges,  and  exemptions,  to  the  extent 
necessary  to  carry  this  act  into  full  effect,  and  to  use  the  pro- 
ceeds thereof  for  the  purposes  aforesaid.  And  all  provisions 
of  law  inconsistent  with  the  provisions  of  this  act  are  hereby 
repealed. 

Act  of  February  8,  1875  —  To   amend  existing  customs  and 
internal-revenue  laws,  and  for  other  purposes 

Sec.  19.  That  every  person,  firm,  association  other  than 
national  bank  associations,  and  every  corporation,  State  bank, 
or  State  banking  association,  shall  pay  a  tax  of  10  per  centum 
on  the  amount  of  their  own  notes  used  for  circulation  and 
paid  out  by  them. 

Sec.  20.  That  every  such  person,  firm,  association,  corpora- 
tion, State  bank,  or  State  banking  association,  and  also  every 
national  banking  association,  shall  pay  a  like  tax  of  10  per 
centum  on  the  amount  of  notes  of  any  person,  firm,  associa- 
tion other  than  a  national  banking  association,  or  of  any  cor- 
poration, State  bank,  or  State  banking  association,  or  of  any 
town,  city,  or  municipal  corporation,  used  for  circulation  and 
paid  out  by  them. 

Sec.  21.  That  the  amount  of  such  circulating  notes,  and 
of  the  tax  due  thereon,  shall  be  returned,  and  the  tax  paid  at 
the  same  time,  and  in  the  same  manner,  and  with  like  penal- 
ties for  failure  to  return  and  pay  the  same,  as  provided  by 
law  for  the  return  and  payment  of  taxes  on  deposits,  capital, 
and  circulation,  imposed  by  the  existing  provisions  of  internal 
revenue  law. 

[Act  of  February  19,  1875,  fixes  the  compensation  of  ex- 
aminers of  national  banks.] 

Act  of  March  3,  1875.     [Legislative,  executive,  and  judicial 
appropriations, .] 

********** 

Provided,  That  the  national  bank  notes  shall  be  printed 
under  the  direction  of  the  Secretary  of  the  Treasury,  and 


562  CONTEST  FOR  SOUND  MONEY 

upon  the  distinctive  or  special  paper  which  has  been,  or  may 
hereafter  be,  adopted  by  him  for  printing  United  States 
notes. 


[Act  of  March  3,  1875  —  Provides  for  the  issue  of  a  silver 
coin  of  the  denomination  of  20  cents,  weight  5  grams,  legal 
tender  for  an  amount  not  exceeding  $5  in  any  one  payment.1  ] 


Act  of  April  17,  1876 — To  provide  for  a  deficiency  in  the 
Printing  and  Engravi?ig  Bureau  of  the  Treasury  Depart- 
ment, and  for  the  issue  of  silver  coin  of  the  United  States 
in  place  of  fractional  currency 

Sec.  2.  That  the  Secretary  of  the  Treasury  is  hereby 
directed  to  issue  silver  coins  of  the  United  States  of  the  de- 
nomination of  10,  20,  25,  and  50  cents  of  standard  value, 
in  redemption  of  an  equal  amount  of  fractional  currency, 
whether  the  same  be  now  in  the  Treasury  awaiting  redemp- 
tion, or  whenever  it  may  be  presented  for  redemption  ; 2  and 
the  Secretary  of  the  Treasury  may,  under  regulations  of  the 
Treasury  Department,  provide  for  such  redemption  and  issue 
by  substitution  at  the  regular  sub-treasuries  and  public  de- 
positories of  the  United  States  until  the  whole  amount  of 
fractional  currency  outstanding  shall  be  redeemed.  And  the 
fractional  currency  redeemed  under  this  act  shall  be  held 
to  be  a  part  of  the  sinking-fund  provided  for  by  existing 
law,  the  interest  to  be  computed  thereon,  as  in  the  case  of 
bonds  redeemed  under  the  act  relating  to  the  sinking-fund. 

[Act  of  fune  30,  1876,  amends  national  bank  act  respecting 
receiverships.] 


Joint  Resolution  of  July  22,  1876  —  For  the  issue  of  silver  coin 

Resolved,  etc.,  That  the  Secretary  of  the  Treasury,  under 
such  limits  and  regulations  as  will  best  secure  a  just  and  fair 
distribution  of  the  same  through  the  country,  may  issue  the 
silver  coin  at  any  time  in  the  Treasury  to  an  amount  not 
exceeding  $10,000,000,  in  exchange  for  an  equal  amount  of 
legal-tender  notes ;  and  the  notes  so  received  in  exchange 

1  Coinage  prohibited  by  Act  of  May  2,  1878. 

2  See  provisions  of  the  Resumption  Act  of  January  14,  1875. 


APPENDIX  563 

shall  be  kept  as  a  special  fund 1  separate  and  apart  from  all 
other  money  in  the  Treasury,  and  be  reissued  only  upon  the 
retirement  and  destruction  of  a  like  sum  of  fractional  cur- 
rency received  at  the  Treasury  in  payment  of  dues  to  the 
United  States ;  and  said  fractional  currency,  when  so  sub- 
stituted, shall  be  destroyed  and  held  as  part  of  the  sinking 
fund,  as  provided  in  the  act  approved  April  17,  1876. 

Sec.  2.  That  the  trade  dollar  shall  not  hereafter  be  a  legal 
tender,  and  the  Secretary  of  the  Treasury  is  hereby  authorized 
to  limit  from  time  to  time,  the  coinage  thereof  to  such  an 
amount  as  he  may  deem  sufficient  to  meet  the  export  demand 
for  the  same. 

Sec.  3.  That  in  addition  to  the  amount  of  subsidiary  silver 
coin  authorized  by  law  to  be  issued  in  redemption  of  the  frac- 
tional currency  it  shall  be  lawful  to  manufacture  at  the  several 
mints,  and  issue  through  the  Treasury  and  its  several  offices, 
such  coin  to  an  amount,  that,  including  the  amount  of  subsid- 
iary silver  coin  and  of  fractional  currency  outstanding,  shall, 
in  the  aggregate,  not  exceed,  at  any  time,  $50,000,000. 

Sec.  4.  That  the  silver  bullion  required  for  the  purposes  of 
this  resolution  shall  be  purchased,  from  time  to  time,  at  market 
rate,  by  the  Secretary  of  the  Treasury,  with  any  money  in  the 
Treasury  not  otherwise  appropriated  ;  but  no  purchase  of  bull- 
ion shall  be  made  under  this  resolution  when  the  market  rate 
for  the  same  shall  be  such  as  will  not  admit  of  the  coinage  and 
issue,  as  herein  provided,  without  loss  to  the  Treasury ;  and  any 
gain  or  seigniorage  arising  from  this  coinage  shall  be  accounted 
for  and  paid  into  the  Treasury,  as  provided  under  existing  laws 
relative  to  the  subsidiary  coinage :  Provided,  That  the  amount 
of  money  at  any  one  time  invested  in  such  silver  bullion,  exclu- 
sive of  such  resulting  coin,  shall  not  exceed  $200,000. 

Act  of  February  28, 1 878  —  To  authorize  the  coinage  of  the  stand- 
ard silver  dollar,  and  to  restore  its  legal-tender  character"1 

Be  it  enacted,  etc.,  That  there  shall  be  coined  at  the  several 
mints  of  the  United  States,  silver  dollars  of  the  weight  of  412^ 
grains  Troy  of  standard  silver,  as  provided  in  the  act  of  January 

1  Under  Sec.  3  of  the  legislative,  executive  and  judicial  appropriations 
Act  of  June  21,  1879  (21  Statutes  at  Large,  p.  23),  the  Secretary  of  the 
Treasury  is  directed  to  issue  immediately,  in  payment  of  arrearages  of 
pensions,  the  legal-tender  notes  held  as  a  special  fund  under  above  au- 
thority, and  it  is  further  provided  that  "  fractional  currency  presented  for 
redemption  shall  be  redeemed  in  any  moneys  in  the  Treasury  not  other- 
wise appropriated." 

2  Vetoed  by  the  President.  Became  a  law  on  February  28,  1878,  on 
passing  each  house  by  a  two-thirds  vote. 


564  CONTEST  FOR  SOUND  MONEY 

18,  1837,  on  which  shall  be  the  devices  and  superscriptions 
provided  by  said  act ;  which  coins,  together  with  all  silver  dol- 
lars heretofore  coined  by  the  United  States,  of  like  weight  and 
fineness,  shall  be  a  legal  tender,  at  their  nominal  value,  for  all 
debts  and  dues  public  and  private,  except  where  otherwise 
expressly  stipulated  in  the  contract.  And  the  Secretary  of  the 
Treasury  is  authorized  and  directed  to  purchase,  from  time  to 
time,  silver  bullion,  at  the  market  price  thereof,  not  less  than 
#2,000,000  worth  per  month,  nor  more  than  #4,000,000  worth 
per  month,  and  cause  the  same  to  be  coined  monthly,  as  fast 
as  so  purchased,  into  such  dollars ;  and  a  sum  sufficient  to 
carry  out  the  foregoing  provision  of  this  act  is  hereby  appro- 
priated out  of  any  money  in  fhe  Treasury  not  otherwise  appro- 
priated. And  any  gain  or  seigniorage  arising  from  this  coinage 
shall  be  accounted  for  and  paid  into  the  Treasury,  as  provided 
under  existing  laws  relative  to  the  subsidiary  coinage  :  Provided, 
That  the  amount  of  money  at  any  one  time  invested  in  such 
silver  bullion,  exclusive  of  such  resulting  coin,  shall  not  exceed 
$5,000,000  ;  And 'provided  farther,  That  nothing  in  this  act  shall 
be  construed  to  authorize  the  payment  in  silver  of  certificates 
of  deposit  issued  under  the  provisions  of  section  254  of  the 
Revised  Statutes.1 

Sec.  2.  That  immediately  after  the  passage  of  this  act,  the 
President  shall  invite  the  governments  of  the  countries  composing 
the  Latin  Union,  so-called,  and  of  such  other  European  nations 
as  he  may  deem  advisable,  to  join  the  United  States  in  a  confer- 
ence to  adopt  a  common  ratio  between  gold  and  silver,  for  the 
purpose  of  establishing,  internationally,  the  use  of  bi-metallic 
money,  and  securing  fixity  of  relative  value  between  those  met- 
als ;  such  conference  to  be  held  at  such  place,  in  Europe  or  in  the 
United  States,  at  such  times  within  6  months,  as  may  be  mutually 
agreed  upon  by  the  executives  of  the  governments  joining  in 
the  same,  whenever  the  governments  so  invited,  or  any  three  of 
them,  shall  have  signified  their  willingness  to  unite  in  the  same. 

The  President  shall,  by  and  with  the  advice  and  consent  of  the 
Senate,  appoint  three  commissioners,  who  shall  attend  such  con- 
ference on  behalf  of  the  United  States,  and  shall  report  the  doings 
thereof  to  the  President,  who  shall  transmit  the  same  to  Congress. 

Said  commissioners  shall  each  receive  the  sum  of  $2500  and 
their  reasonable  expenses,  to  be  approved  by  the  Secretary  of 
State ;  and  the  amount  necessary  to  pay  such  compensation 
and  expenses  is  hereby  appropriated  out  of  any  money  in  the 
Treasury  not  otherwise  appropriated. 

1  Refers  to  gold  certificates. 


APPENDIX  565 

Sec.  3.  That  any  holder  of  the  coin  authorized  by  this  act 
may  deposit  the  same  with  the  Treasurer  or  any  assistant  treas- 
urer of  the  United  States,  in  sums  not  less  than  $10,  and  receive 
therefor  certificates  of  not  less  than  #10  each,  corresponding 
with  the  denominations  of  the  United  States  notes.  The  coin 
deposited  for  or  representing  the  certificates  shall  be  retained 
in  the  Treasury  for  the  payment  of  the  same  on  demand.  Said 
certificates  shall  be  receivable  for  customs,  taxes,  and  all  public 
dues,  and,  when  so  received,  may  be  re-issued. 

Sec.  4.  All  acts  and  parts  of  acts  inconsistent  with  the  pro- 
visions of  this  act  are  hereby  repealed. 

Act  of  May  31,  1878  —  To  forbid  the  further  retirement  of 
United  States  legal-tender  notes 

Be  it  enacted,  etc.,  That  from  and  after  the  passage  of  this 
act  it  shall  not  be  lawful  for  the  Secretary  of  the  Treasury  or 
other  officer  under  him  to  cancel  or  retire  any  more  of  the 
United  States  legal-tender  notes.  And  when  any  of  said  notes 
may  be  redeemed  or  be  received  into  the  Treasury  under  any 
law  from  any  source  whatever,  and  shall  belong  to  the  United 
States,  they  shall  not  be  retired,  cancelled,  or  destroyed,  but 
they  shall  be  reissued  and  paid  out  again  and  kept  in  circula- 
tion :  *  Provided,  That  nothing  herein  shall  prohibit  the  cancel- 
lation and  destruction  of  mutilated  notes  and  the  issue  of  other 
notes  of  like  denomination  in  their  stead,  as  now  provided  by 
law. 

Act  of  June  9,  1879 —  To  provide  for  the  exchange  of  subsidiary 
coins  for  latvful  money  of  the  United  States,  etc. 

Be  it  enacted,  etc.,  That  the  holder  of  any  of  the  silver  coins 
of  the  United  States  of  smaller  denominations  than  $1,  may,  on 
presentation  of  the  same  in  sums  of  $20,  or  any  multiple  thereof 
at  the  office  of  the  Treasurer  or  any  assistant  treasurer  of  the 
United  States,  receive  therefor  lawful  money  of  the  United  States. 

Sec.  2.  The  Treasurer  or  any  assistant  treasurer  of  the 
United  States  who  may  receive  any  coins  under  the  provision 
of  this  act  shall  exchange  the  same  in  sums  of  $20,  or  any  mul- 
tiple thereof,  for  lawful  money  of  the  United  States,  on  demand 
of  any  holder  thereof. 

Sec.  3.  That  the  present  silver  coins  of  the  United  States 
of  smaller  denominations  than  $1  shall  hereafter  be  a  legal 
tender  in  all  sums  not  exceeding  $10  in  full  payment  of  all 
dues  public  and  private. 

1  See  Act  of  March  14,  1900. 


566  CONTEST  FOR  SOUND  MONEY 

» 

Sec.  4.  That  all  laws  or  parts  of  laws  in  conflict  with  this 
act  be,  and  the  same  are  hereby,  repealed. 

[Act  of  February  14,  1880  —  Authorizes  the  conversion  of 
national  gold  banks  into  ordinary  national  banks,  specie  pay- 
ments having  been  resumed.] 

Act  of  May  26,   1882  —  To  authorize  the  receipt  of  United 
States  gold  coin  in  exchange  for  gold  bars l 

Be  it  enacted,  etc.,  That  the  superintendents  of  the  coinage 
mints,  and  of  the  United  States  assay  office  at  New  York,  are 
hereby  authorized  to  receive  United  States  gold  coin  from  any 
holder  thereof  in  sums  not  less  than  $5000,  and  to  pay  and  . 
deliver  in  exchange  therefor  gold  bars  in  value  equaling  such 
coin  so  received. 

Act  of  July  12,  1882 —  To  enable  national  banking  associations 
to  extend  their  corporate  existence,  and  for  other  purposes 

Be  it  enacted,  etc.,  That  any  national  banking  association 
organized  under  the  acts  of  February  25th,  1863,  June  3d,  1864, 
and  February  14th,  1880,  or  under  sections  5133,  5134,  5135, 
5136,  and  5154  of  the  Revised  Statutes  of  the  United  States,2 
may,  at  any  time  within  the  2  years  next  previous  to  the  date 
of  the  expiration  of  its  corporate  existence  under  present  law, 
and  with  the  approval  of  the  Comptroller  of  the  Currency,  to 
be  granted,  as  hereinafter  provided,  extend  its  period  of  suc- 
cession by  amending  its  articles  of  association  for  a  term  of  not 
more  than  20  years  from  the  expiration  of  the  period  of  succes- 
sion named  in  said  articles  of  association,  and  shall  have  suc- 
cession for  such  extended  period,  unless  sooner  dissolved  by 
the  act  of  shareholders  owning  two-thirds  of  its  stock,  or  unless 
its  franchise  becomes  forfeited  by  some  violation  of  law,  or 
unless  hereafter  modified  or  repealed. 

[Secs.  3  to  5  inclusive  regulate  the  details  of  procedure.] 
Sec.  6.  That  the  circulating  notes  of  any  association  so 
extending  the  period  of  its  succession  which  shall  have  been 
issued  to  it  prior  to  such  extension  shall  be  redeemed  at  the 
Treasury  of  the  United  States,  as  provided  in  section  3  of  the 
act  of  June  20th,  1874,  entitled  "An  act  fixing  the  amount  of 
United  States  notes,  etc.,"  and  such  notes  when  redeemed  shall 
be  forwarded  to  the  Comptroller  of  the  Currency,  and  destroyed 
as  now  provided  by  law ;  and  at  the  end  of  3  years  from  the 

1  See  Act  of  March  3,  1891,  amending  this  Act. 

2  Secs.  5,  6,  8  and  36  of  Act  of  June  3,  1864. 


APPENDIX  567 

date  of  the  extension  of  the  corporate  existence  of  each  bank 
the  association  so  extended  shall  deposit  lawful  money  with  the 
Treasurer  of  the  United  States  sufficient  to  redeem  the  remainder 
of  the  circulation  which  was  outstanding  at  the  date  of  its  exten- 
sion, as  provided  in  sections  5222,  5224,  and  5225  of  the  Re- 
vised Statutes ; 1  and  any  gain  that  may  arise  from  the  failure  to 
present  such  circulating  notes  for  redemption  shall  inure  to  the 
benefit  of  the  United  States ;  and  from  time  to  time,  as  such 
notes  are  redeemed  or  lawful  money  deposited  therefor  as  pro- 
vided herein,  new  circulating  notes  shall  be  issued  as  provided 
by  this  act,  bearing  such  devices,  to  be  approved  by  the  Secretary 
of  the  Treasury,  as  shall  make  them  readily  distinguishable  from 
the  circulating  notes  heretofore  issued  :  Provided,  however,  That 
each  banking  association  which  shall  obtain  the  benefit  of  this 
act  shall  reimburse  to  the  Treasury  the  cost  of  preparing  the  plate 
or  plates  for  such  new  circulating  notes  as  shall  be  issued  to  it. 

[Sec.  7  relates  to  winding  up  banks  which  do  not  extend 
charters.] 

Sec.  8.  That  national  banks  now  organized  or  hereafter 
organized  having  a  capital  of  #150,000  or  less,  shall  not  be 
required  to  keep  on  deposit  or  deposit  with  the  Treasurer  of 
the  United  States  United  States  bonds  in  excess  of  one-fourth 
of  their  capital  stock  as  security  for  their  circulating  notes  ;  but 
such  banks  shall  keep  on  deposit  or  deposit  with  the  Treasurer 
of  the  United  States  the  amount  of  bonds  as  herein  required. 
And  such  of  those  banks  having  on  deposit  bonds  in  excess  of 
that  amount  are  authorized  to  reduce  their  circulation  by  the 
deposit  of  lawful  money  as  provided  by  law  :  Provided,  That 
the  amount  of  such  circulating  notes  shall  not  in  any  case 
exceed  90  per  centum  of  the  par  value  of  the  bonds  deposited 
as  herein  provided  :  Provided,  further,  That  the  national  banks 
which  shall  hereafter  make  deposits  of  lawful  money  for  the 
retirement  in  full  of  their  circulation  shall,  at  the  time  of  their 
deposit,  be  assessed  for  the  cost  of  transporting  and  redeeming 
their  notes  then  outstanding,  a  sum  equal  to  the  average  cost 
of  the  redemption  of  national-bank  notes  during  the  preceding 
year,  and  shall  thereupon  pay  such  assessment.  And  all  national 
banks  which  have  heretofore  made  or  shall  hereafter  make 
deposits  of  lawful  money  for  the  reduction  of  their  circulation, 
shall  be  assessed,  and  shall  pay  an  assessment  in  the  manner 
specified  in  section  3  of  the  act  approved  June  20th,  1874,  for 
the  cost  of  transporting  and  redeeming  their  notes  redeemed 
from  such  deposits  subsequently  to  June  30th,  1881. 

1  Act  of  July  14,  1870. 


568  CONTEST  FOR  SOUND  MONEY 

Sec.  9.  That  any  national  banking  association  now  organized, 
or  hereafter  organized,  desiring  to  withdraw  its  circulating  notes, 
upon  a  deposit  of  lawful  money  with  the  Treasurer  of  the  United 
States,  as  provided  in  section  4  of  the  act  of  June  20th,  1874, 
entitled  "  An  act  fixing  the  amount  of  United  States  notes,  etc.," 
or  as  provided  in  this  act,  is  authorized  to  deposit  lawful  money 
and  withdraw  a  proportionate  amount  of  the  bonds  held  as 
security  for  its  circulating  notes  in  the  order  of  such  deposits ; 
and  no  national  bank  which  makes  any  deposit  of  lawful  money 
in  order  to  withdraw  its  circulating  notes  shall  be  entitled  to 
receive  any  increase  of  its  circulation  for  the  period  of  6  months 
from  the  time  it  made  such  deposit  of  lawful  money  for  the 
purpose  aforesaid  : 1  Provided,  That  not  more  than  $3,000,000 
of  lawful  money  shall  be  deposited  during  any  calendar  month 
for  this  purpose  :  And  provided  further,  That  the  provisions  of 
this  section  shall  not  apply  to  bonds  called  for  redemption  by 
the  Secretary  of  the  Treasury,  nor  to  the  withdrawal  of  circulat- 
ing notes  in  consequence  thereof. 

Sec.  10.  That  upon  a  deposit  of  bonds  as  described  by  sec- 
tions 5159  and  5160,2  except  as  modified  by  section  4  of  an  act 
entitled  "An  act  fixing  the  amount  of  United  States  notes, 
etc.,"  approved  June  20th,  1874,  and  as  modified  by  section  8 
of  this  act,  the  association  making  the  same  shall  be  entitled  to 
receive  from  the  Comptroller  of  the  Currency  circulating  notes 
of  different  denominations,  in  blank,  registered  and  counter- 
signed as  provided  by  law,  equal  in  amount  to  90  per  centum 
of  the  current  market  value,  not  exceeding  par,  of  the  United 
States  bonds  so  transferred  and  delivered,  and  at  no  time  shall 
the  total  amount  of  such  notes  issued  to  any  such  association 
exceed  90  per  centum  of  the  amount  at  such  time  actually  paid 
in  of  its  capital  stock  ; 3  and  the  provisions  of  sections  5 1 7 1  *  and 
5176  of  the  Revised  Statutes5  are  hereby  repealed. 

[Sec.  1 1  provides  for  an  issue  of  3  per  cent  bonds.] 

Sec.  12.  That  the  Secretary  of  the  Treasury  is  authorized 
and  directed  to  receive  deposits  of  gold  coin  with  the  Treas- 
urer or  assistant  treasurers  of  the  United  States,  in  sums  not 
less  than  $20,  and  to  issue  certificates  therefor  in  denomina- 
tions of  not  less  than  $20  each,  corresponding  with  the  denomi- 
nations of  United  States  notes.  The  coin  deposited  for  or 
representing  the  certificates  of  deposit  shall  be  retained  in  the 

1  See  Act  of  March  14,  1900. 

2  Sees.  30  and  31,  Act  of  June  3,  1864. 

3  See  Act  of  March  14,  1900. 

4  Act  of  March  3,  1865. 

5  Act  of  July  12,  1870. 


APPENDIX  569 

Treasury  for  the  payment  of  the  same  on  demand.  Said  cer- 
tificates shall  be  receivable  for  customs,  taxes,  and  all  public 
dues,  and  when  so  received  may  be  reissued ;  and  such  certifi- 
cates, as  also  silver  certificates,  when  held  by  any  national- 
banking  association,  shall  be  counted  as  part  of  its  lawful 
reserve ;  and  no  national-banking  association  shall  be  a  mem- 
ber of  any  clearing-house  in  which  such  certificates  shall  not 
be  receivable  in  the  settlement  of  clearing-house  balances : 
Provided,  That  the  Secretary  of  the  Treasury  shall  suspend  the 
issue  of  such  gold  certificates  whenever  the  amount  of  gold 
coin  and  gold  bullion  in  the  Treasury  reserved  for  the  redemp- 
tion of  United  States  notes  falls  below  $100,000,000;  and  the 
provisions  of  section  5207  of  the  Revised  Statutes  shall  be 
applicable  to  the  certificates  herein  authorized  and  directed  to 
be  issued.1 

Sec.  13.  That  any  officer,  clerk,  or  agent  of  any  national- 
banking  association  who  shall  willfully  violate  the  provisions  of 
an  act  entitled  "An  act  in  reference  to  certifying  checks  by 
national  banks,"  approved  March  3,  1869  (being  section  5208 
of  the  Revised  Statutes  of  the  United  States),  or  who  shall 
resort  to  any  device,  or  receive  any  fictitious  obligation,  direct 
or  collateral,  in  order  to  evade  the  provisions  thereof,  or  who 
shall  certify  checks  before  the  amount  thereof  shall  have  been 
regularly  entered  to  the  credit  of  the  dealer  upon  the  books  of 
the  banking  association,  shall  be  deemed  guilty  of  a  misde- 
meanor, and  shall,  on  conviction  thereof  in  any  circuit  or  dis- 
trict court  of  the  United  States,  be  fined  not  more  than  five 
thousand  dollars,  or  shall  be  imprisoned  not  more  than  five 
years,  or  both,  in  the  discretion  of  the  court. 

Act  of  August  7,  1882  —  Making  appropriations  for  sundry 
civil  expenses  of  the  government  for  the  fiscal  year  ending 
June  30,  1883,  etc. 

********** 

For  the  transportation  of  silver  coins  :  That  the  Secretary 
of  the  Treasury  be,  and  he  is  hereby,  authorized  and  directed 
to  transport,  free  of  charge,  silver  coins  when  requested  to  do 
so  :  Provided,  That  an  equal  amount  in  coin  or  currency  shall 
have  been  deposited  in  the  Treasury  by  the  applicant  or  appli- 
cants ;  and  that  there  is  hereby  appropriated  $10,000,  or  so 
much  thereof  as  may  be  necessary,  for  that  purpose,  and  that  the 
same  be  available  from  and  after  the  passage  of  this  act.  .  .  . 

1  See  Sec.  6,  Act  of  March  14,  1900,  now  governing  the  issue  of  gold 
certificates. 


570  CONTEST  FOR  SOUND  MONEY 

Act  of  March  3,  1883,  to  reduce  internal  revenue  repeals  tax 
on  deposits  and  capital  of  national  banks,  and  stamp  tax  on 
bank-checks. 

Act  of  August  4,  1886  —  Making  appropriations  for  sundry 
civil  expenses  of  the  Government  for  the  fiscal  year  ending 
June  30th,  1887,  etc. 

Be  it  enacted,  etc.,  .  .  .  For  labor  and  expenses  of  engrav- 
ing and  printing  .  .  .  :  Provided,  That  no  portion  of  this 
sum  shall  be  expended  for  printing  United  States  notes  of  large 
denomination  in  lieu  of  notes  of  small  denomination  cancelled 
or  retired.1 

And  the  Secretary  of  the  Treasury  is  hereby  authorized  and 
required  to  issue  silver  certificates  in  denominations  of  1,  2, 
and  5  dollars,  and  the  silver  certificates  herein  authorized  shall 
be  receivable,  redeemable,  and  payable  in  like  manner  and  for 
like  purposes  as  is  provided  for  silver  certificates  by  the  act  of 
February  28th,  1878,  entitled  "  An  act  to  authorize  the  coinage 
of  the  standard  silver  dollar,  and  to  restore  its  legal-tender 
character,"  and  denominations  of  1,  2,  and  5  dollars  may  be 
issued  in  lfeu  of  silver  certificates  of  larger  denominations  in 
the  Treasury  or  in  exchange  therefor  upon  presentation  by  the 
holder  and  to  that  extent  said  certificates  of  larger  denomina- 
tions shall  be  cancelled  and  destroyed.2 

********** 

Act  of  March  29,  1886,  applies  to  receiverships  of  national 
banks. 

Act  of  May  1,  1886,  provides  general  procedure  for  increas- 
ing capital  and  changing  name  or  location  of  national  banks. 

Act  of  March  3,  1887  —  \To  amend  national  bank  act  relative 
to  reserve  cities] 

Be  it  enacted,  etc.,  That  whenever  three-fourths  in  number 
of  the  national  banks  located  in  any  city  of  the  United  States 
having  a  population  of  50,000  people  shall  make  application  to 
the  Comptroller  of  the  Currency,  in  writing,  asking  that  the 
name  of  the  city  in  which  such  banks  are  located  shall  be 
added  to  the  cities  named  in  sections  5 191  and  5192  of  the 
Revised  Statutes,3  the  Comptroller  shall  have  authority  to  grant 
such  request,  and  every  bank  located  in  such  city  shall  at  all 

1  The  same  provision  is  in  the  appropriation  acts  for  succeeding  years 
slightly  altered  in  verbiage. 

2  See  Sec.  7  of  the  Act  of  March  14,  1900. 

3  Sees.  31  and  32,  Act  of  June  3,  1864. 


APPENDIX 


571 


times  thereafter  have  on  hand,  in  lawful  money  of  the  United 
States,  an  amount  equal  to  at  least  25  per  centum  of  its 
deposits,  as  provided  in  sections  5 191  and  5195  of  the  Revised 
Statutes. 

Sec.  2.  That  whenever  three-fourths  in  number  of  the 
national  banks  located  in  any  city  of  the  United  States  having 
a  population  of  200,000  people  shall  make  application  to  the 
Comptroller  of  the  Currency,  in  writing,  asking  that  such  city 
may  be  a  central  reserve  city,  like  the  city  of  New  York,  in 
which  one-half  of  the  lawful-money  reserve  of  the  national 
banks  located  in  other  reserve  cities  may  be  deposited,  as  pro- 
vided in  section  5 195 1  of  the  Revised  Statutes,  the  Comptroller 
shall  have  authority,  with  the  approval  of  the  Secretary  of  the 
Treasury,  to  grant  such  request,  and  every  bank  located  in 
such  city  shall  at  all  times  thereafter  have  on  hand,  in  lawful 
money  of  the  United  States,  25  per  centum  of  its  deposits,  as 
provided  in  section  5 191  of  the  Revised  Statutes. 

Sec.  3.  That  section  3  of  the  act  of  January  14,  1875,  en* 
titled  "  An  act  to  provide  for  the  resumption  of  specie  pay- 
ments," be,  and  the  same  is,  hereby,  amended  by  adding  after 
the  words  "  New  York  "  the  words  "  and  the  city  of  San  Fran- 
cisco, California." 

Act  of  March  3,  1887  —  For  the  retirement  and  recoinage  of  the 
trade  dollar 2 

Be  it  enacted,  etc.,  That  for  a  period  of  six  months  after  the 
passage  of  this  act,  United  States  trade-dollars,  if  not  defaced, 
mutilated  or  stamped,  shall  be  received  at  the  office  of  the 
Treasurer,  or  any  assistant  treasurer  of  the  United  States,  in 
exchange  for  a  like  amount,  dollar  for  dollar,  of  standard  silver 
dollars,  or  of  subsidiary  coins  of  the  United  States. 

Sec.  2.  That  the  trade-dollars  received  by,  paid  to,  or  de- 
posited with  the  Treasurer  or  any  assistant  treasurer  or  national 
depositary  of  the  United  States  shall  not  be  paid  out  or  in  any 
other  manner  issued,  but,  at  the  expense  of  the  United  States, 
shall  be  transmitted  to  the  coinage  mints  and  recoined  into 
standard  silver  dollars  or  subsidiary  coin,  at  the  discretion  of 
the  Secretary  of  the  Treasury  :  Provided,  that  the  trade-dollars 
recoined  under  this  act  shall  not  be  counted  as  part  of  the  silver 
bullion  required  to  be  purchased  and  coined  into  standard 
dollars  as  required  by  the  act  of  February  28,  1878. 

1  Sec.  32,  Act  of  June  3,  1864. 

2  Received  by  the  President,  February  19,  1887.  Became  a  law  without 
his  signature  on  March  3,  1887. 


572  CONTEST  FOR  SOUND  MONEY 

Sec.  3.  That  all  laws  and  parts  of  laws  authorizing  the  coinage 
and  issuance  of  United  States  trade-dollars  are  hereby  repealed. 

Act  of  July  14,  1890 — Directing  the  purchase  of  silver  bullion 
and  the  issue  of  Treasury  notes  tfiereon,  and  for  other 
purposes 

Be  it  enacted,  etc.,  That  the  Secretary  of  the  Treasury  is  here- 
by directed  to  purchase,  from  time  to  time,  silver  bullion  to  the 
aggregate  amount  of  4,500,000  ounces,  or  so  much  thereof  as 
may  be  offered  in  each  month,  at  the  market  price  thereof,  not 
exceeding  one  dollar  for  371  and  ^$  grains  of  pure  silver,  and 
to  issue  in  payment  for  such  purchases  of  silver  bullion  Treasury 
notes  of  the  United  States  to  be  prepared  by  the  Secretary  of 
the  Treasury,  in  such  form  and  of  such  denominations,  not  less 
than  $1  nor  more  than  $1,000,  as  he  may  prescribe,  and  a  sum 
sufficient  to  carry  into  effect  the  provisions  of  this  act  is  hereby 
appropriated  out  of  any  money  in  the  Treasury  not  otherwise 
appropriated.1 

Sec.  2.  That  the  Treasury  notes  issued  in  accordance  with 
the  provisions  of  this  act  shall  be  redeemable  on  demand,  in 
coin,2  at  the  Treasury  of  the  United  States,  or  at  the  office  of 
any  assistant  treasurer  of  the  United  States,  and  when  so  re- 
deemed may  be  reissued  ;  but  no  greater  or  less  amount  of  such 
notes  shall  be  outstanding  at  any  time  than  the  cost  of  the  silver 
bullion  and  the  standard  silver  dollars  coined  therefrom,  then 
held  in  the  Treasury  purchased  by  such  notes ;  and  such 
Treasury  notes  shall  be  a  legal  tender  in  payment  of  all  debts, 
public  and  private,  except  where  otherwise  expressly  stipulated 
in  the  contract,  and  shall  be  receivable  for  customs,  taxes,  and 
all  public  dues,  and  when  so  received  may  be  reissued ;  and 
such  notes,  when  held  by  any  national  banking  association, 
may  be  counted  as  a  part  of  its  lawful  reserve.  That  upon 
demand  of  the  holder  of  any  of  the  Treasury  notes  herein  pro- 
vided for  the  Secretary  of  the  Treasury  shall,  under  such  regu- 
lations as  he  may  prescribe,  redeem  such  notes  in  gold  or  silver 
coin,  at  his  discretion,  it  being  the  established  policy  of  the 
United  States  to  maintain  the  two  metals  on  a  parity  with  each 
other  upon  the  present  legal  ratio,  or  such  ratio  as  may  be  pro- 
vided by  law.3 

1  Repealed  by  Act  of  November  I,  1893. 

2  See  Sec.  2  of  the  Act  of  March  14,  1900,  making  these  notes  redeem- 
able in  gold. 

8  See  Act  of  March  14,  1900,  providing  for  cancellation  and  retirement 
of  Treasury  notes  as  rapidly  as  they  reach  the  Treasury,  and  substitution 
of  silver  certificates  therefor. 


APPENDIX  573 

Sec.  3.  That  the  Secretary  of  the  Treasury  shall  each  month 
coin  2,000,000  ounces  of  the  silver  bullion  purchased  under  the 
provisions  of  this  act  into  standard  silver  dollars  until  the  first 
day  of  July,  1891,  and  after  that  time  he  shall  coin  of  the  silver 
bullion  purchased  under  the  provisions  of  this  act  as  much  as 
may  be  necessary  to  provide  for  the  redemption  of  the  Treasury 
notes  herein  provided  for,  and  any  gain  or  seigniorage  arising 
from  such  coinage  shall  be  accounted  for  and  paid  into  the 
Treasury.1 

Sec.  4.  That  the  silver  bullion  purchased  under  the  pro- 
visions of  this  act  shall  be  subject  to  the  requirements  of  exist- 
ing law  and  the  regulations  of  the  mint  service  governing  the 
methods  of  determining  the  amount  of  pure  silver  contained, 
and  the  amount  of  charges  or  deductions,  if  any,  to  be  made. 

Sec.  5.  That  so  much  of  the  act  of  February  28, 1878,  entitled 
"An  act  to  authorize  the  coinage  of  the  standard  silver  dollar  and 
to  restore  its  legal-tender  character,"  as  requires  the  monthly 
purchase  and  coinage  of  the  same  into  silver  dollars  of  not  less 
than  $2,000,000,  nor  more  than  $4,000,000  worth  of  silver 
bullion,  is  hereby  repealed. 

Sec.  6.  That  upon  the  passage  of  this  act  the  balances  stand- 
ing with  the  Treasurer  of  the  United  States  to  the  respective 
credits  of  national  banks  for  deposits  made  to  redeem  the  cir- 
culating notes  of  such  banks,  and  all  deposits  thereafter  received 
for  like  purpose,  shall  be  covered  into  the  Treasury  as  a  mis- 
cellaneous receipt,  and  the  Treasury  of  the  United  States  shall 
redeem  from  the  general  cash  in  the  Treasury  the  circulating 
notes  of  said  banks  which  may  come  into  his  possession  subject 
to  redemption. 

And  upon  the  certificate  of  the  Comptroller  of  the  Currency 
that  such  notes  have  been  received  by  him  and  that  they  have 
been  destroyed  and  that  no  new  notes  shall  be  issued  in  their 
place,  reimbursement  of  their  amount  shall  be  made  to  the 
Treasurer,  under  such  regulations  as  the  Secretary  of  the  Treas- 
ury may  prescribe,  from  an  appropriation  hereby  created,  to 
be  known  as  "  National  bank  notes :  Redemption  account," 
but  the  provisions  of  this  act  shall  not  apply  to  the  deposits 
received  under  section  3  of  the  act  of  June  20th,  1874,  requir- 
ing every  national  bank  to  keep  in  lawful  money  with  the  Treas- 
urer of  the  United  States  a  sum  equal  to  5  per  centum  of  its 
circulation,  to  be  held  and  used  for  the  redemption  of  its  cir- 
culating notes ;  and  the  balance  remaining  of  the  deposits  so 
covered  shall,  at  the  close  of  each  month,  be  reported  on  the 

1  See  Sec.  34  of  the  Act  of  June  13,  1898 ;  also  Act  of  March  14,  1900. 


574  CONTEST  FOR  SOUND  MONEY 

monthly  public  debt  statement  as  debt  of  the  United  States 
bearing  no  interest. 

Sec.  7.  That  this  act  shall  take  effect  30  days  from  and  after 
its  passage. 

Act  of  October  1,  1890 — To  reduce  the  revenue  and  equalize 
duties  on  imports,  and  for  other  purposes 

Be  it  enacted,  etc. 

Sec.  52.  That  the  value  of  foreign  coin  as  expressed  in  the 
money  of  account  of  the  United  States  shall  be  that  of  the 
pure  metal  of  such  coin  of  standard  value ;  and  the  values  of 
the  standard  coins  in  circulation  of  the  various  nations  of  the 
world  shall  be  estimated  quarterly  by  the  Director  of  the  Mint, 
and  be  proclaimed  by  the  Secretary  of  the  Treasury  immedi- 
ately after  the  passage  of  this  act,  and  thereafter  quarterly  on 
the  first  day  of  January,  April,  July  and  October  in  each  year. 


Act  of  March  3,   1891  —  [Legislative,  executive,  and  judicial 
appropriations  Act\ 

Sec.  3.  That  an  act  to  authorize  the  receipt  of  United  States 
gold  coin  in  exchange  for  gold  bars,  approved  May  26th,  1882, 
be  amended  to  read  as  follows  : 

"  That  the  superintendents  of  the  coinage  mints  and  of  the 
United  States  assay  office  at  New  York  may,  with  the  approval 
of  the  Secretary  of  the  Treasury,  but  not  otherwise,  receive 
United  States  gold  coin  from  any  holder  thereof  in  sums  of 
not  less  than  $5000,  and  pay  and  deliver  in  exchange  therefor 
gold  bars  in  value  equaling  such  coin  so  received  :  Provided, 
That  the  Secretary  of  the  Treasury  may  impose  for  such  ex- 
change a  charge  which,  in  his  judgment,  shall  equal  the  cost 
of  manufacturing  the  bars." 


Act  of  March  3,  1891 — Making  appropriations  for  sundry 
civil  expenses  of  the  Government  for  the  fiscal  year  ending 
June  30,  1892,  etc. 

.  .  .  For  recoinage  of  the  uncurrent  fractional  silver  coins 
abraded  below  the  limit  of  tolerance  in  the  Treasury,  to  be 
expended  under  the  direction  of  the  Secretary  of  the  Treasury, 


APPENDIX  575 

$150,000 :  Provided,  That  the  Secretary  of  the  Treasury  shall, 
as  soon  as  practicable,  coin  into  standard  silver  dollars  the 
trade-dollar  bullion  and  trade  dollars  now  in  the  Treasury,  the 
expense  thereof  to  be  charged  to  the  silver  profit  fund.  .  .  . 


Act  of  July  28,  1892  —  To  amend  the  National  Bank  Act  in 
providing  for  the  redemption  of  national  bank  notes  stolen 
from  or  lost  by  banks  of  issue 

•  Be  it  enacted,  etc.,  That  the  provisions  of  the  Revised 
Statutes  of  the  United  States,  providing  for  the  redemption  of 
national  bank  notes,  shall  apply  to  all  national  bank  notes  that 
have  been  or  may  be  issued  to,  or  received  by,  any  national 
bank,  notwithstanding  such  notes  may  have  been  lost  by,  or 
stolen  from,  the  bank  and  put  in  circulation  without  the 
signature  or  upon  the  forged  signature  of  the  president  or  vice- 
president  and  cashier. 

Act  of  August  3,  1892,  relates  to  appointment  of  receivers 
of  national  banks. 

Act  of  August  5,  1892,  provides  for  coinage  of  half-dollars 
for  World's  Fair,  making  them  legal  tender. 


Act  of  August  5,  1892  —  Making  appropriations  for  sundry 
civil  expenses  of  the  Government,  etc. 

Be  it  enacted,  etc. 

The  President  of  the  United  States  is  hereby  authorized  to 
appoint  five  commissioners  to  an  international  conference, 
to  be  held  at  a  place  to  be  hereafter  designated,  with  a  view  to 
secure,  internationally,  a  fixity  of  relative  value  between  gold 
and  silver,  as  money,  by  means  of  a  common  ratio  between 
those  metals,  with  free  mintage  at  such  ratio,  and  for  compen- 
sation of  said  commissioners,  and  for  all  reasonable  expenses 
connected  therewith,  to  be  approved  by  the  Secretary  of  State, 
including  the  proportion  to  be  paid  by  the  United  States  of  the 
joint  expenses  of  such  conference,  $80,000,  or  so  much  thereof 
as  may  be  necessary. 

Act  of  March  3,  1893,  provided  for  coinage  of  quarter  dol- 
lars for  World's  Fair. 


576  CONTEST  FOR  SOUND  MONEY 

Act  of  November  i,  1893 — To  repeal  a  part  of  an  act  approved 
July  14th,  1890,  entitled  "An  Act  directing  the  purchase 
of  silver  bullion  and  the  issue  of  Treasury  notes  thereon, 
and  for  other  purposes  " 

Be  it  enacted,  etc.,  That  so  much  of  the  act  approved  July 
14th,  1890,  entitled  "  An  act  directing  the  purchase  of  silver 
bullion  and  issue  of  Treasury  notes  thereon,  and  for  other  pur- 
poses," as  directs  the  Secretary  of  the  Treasury  to  purchase 
from  time  to  time  silver  bullion  to  the  aggregate  amount  of 
4,500,000  ounces,  or  so  much  thereof  as  may  be  offered  in 
each  month  at  the  market  price  thereof,  not  exceeding  $1  for 
371  and  y2^  grains  of  pure  silver,  and  to  issue  in  payment  for 
such  purchases  Treasury  notes  of  the  United  States,  be,  and 
the  same  is  hereby,  repealed.  And  it  is  hereby  declared  to 
be  the  policy  of  the  United  States  to  continue  the  use  of  both 
gold  and  silver  as  standard  money,  and  to  coin  both  gold  and 
silver  into  money  of  equal  intrinsic  and  exchangeable  value, 
such  equality  to  be  secured  through  international  agreement, 
or  by  such  safeguards  of  legislation  as'  will  insure  the  mainten- 
ance of  the  parity  in  value  of  the  coins  of  the  two  metals,  and 
the  equal  power  of  every  dollar  at  all  times  in  the  markets  and 
in  the  payment  of  debts.  And  it  is  hereby  further  declared 
that  the  efforts  of  the  Government  should  be  steadily  directed 
to  the  establishment  of  such  a  safe  system  of  bimetallism  as 
will  maintain  at  all  times  the  equal  power  of  every  dollar 
coined  or  issued  by  the  United  States,  in  the  markets  and  in 
the  payment  of  debts. 

Act  of  August  13,  1894 —  To  subject  to  State  taxation  national- 
bank  notes  and  United  States  Treasury  notes 

Be  it  enacted,  etc.,  That  circulating  notes  of  national  banking 
associations  and  United  States  legal-tender  notes  and  other 
notes  and  certificates  of  the  United  States  payable  on  demand 
and  circulating  or  intended  to  circulate  as  currency  and  gold, 
silver  or  other  coin  shall  be  subject  to  taxation  as  money  on 
hand  or  on  deposit  under  the  laws  of  any  State  or  territory : 
Provided,  That  any  such  taxation  shall  be  exercised  in  the  same 
manner  and  at  the  same  rate  that  any  such  State  or  Territory 
shall  tax  money  or  currency  circulating  as  money  within  its 
jurisdiction. 

Sec.  2.  That  the  provisions  of  this  act  shall  not  be  deemed 
or  held  to  change  existing  laws  in  respect  of  the  taxation  of 
national  banking  associations. 


APPENDIX  577 

Act  of  June  13,  1898  —  To  provide  ways  and  means  to  meet  war 
expenditures  and  for  other  purposes 

Be  it  enacted,  etc.,  .  .  . 

Sec.  34.  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized and  directed  to  coin  into  standard  silver  dollars,  as  rapidly 
as  the  public  interests  may  require,  to  an  amount,  however,  of 
not  less  than  $1,500,000  in  each  month,  all  of  the  silver  bullion 
now  in  the  Treasury  purchased  in  accordance  with  the  pro- 
visions of  the  Act  approved  July  14,  1890,  entitled,  "An  act 
directing  the  purchase  of  silver  bullion  and  the  issue  of  Treasury 
notes  thereon,  and  for  other  purposes,"  and  said  dollars,  when 
so  coined,  shall  be  used  and  applied  in  the  manner  and  for  the 
purposes  named  in  said  Act. 

Act  of  March  14,  1900 —  To  define  and  fix  the  standard  of 
value,  to  maintain  the  parity  of  ail  forms  of  money  issued 
or  coined  by  the  United  States,  to  refund  the  public  debt, 
and  for  other  purposes 

Be  it  enacted,  etc.,  That  the  dollar  consisting  of  25^  grains 
of  gold,  nine-tenths  fine,  as  established  by  section  35  n  of  the 
Revised  Statutes  of  the  United  States,1  shall  be  the  standard 
unit  of  value,  and  all  forms  of  money  issued  or  coined  by  the 
United  States  shall  be  maintained  at  a  parity  of  value  with  this 
standard,  and  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury  to  maintain  such  parity. 

Sec.  2.  That  United  States  notes,  and  Treasury  notes  issued 
under  the  Act  of  July  14,  1890,  when  presented  to  the  Treasury 
for  redemption,  shall  be  redeemed  in  gold  coin  of  the  standard 
fixed  in  the  first  section  of  this  Act,  and  in  order  to  secure  the 
prompt  and  certain  redemption  of  such  notes  as  herein  provided 
it  shall  be  the  duty  of  the  Secretary  of  the  Treasury  to  set  apart 
in  the  Treasury  a  reserve  fund  of  $150,000,000  in  gold  coin 
and  bullion,  which  fund  shall  be  used  for  such  redemption  pur- 
poses only,  and  whenever  and  as  often  as  any  of  said  notes 
shall  be  redeemed  from  said  fund  it  shall  be  the  duty  of  the 
Secretary  of  the  Treasury  to  use  said  notes  so  redeemed  to 
restore  and  maintain  such  reserve  fund  in  the  manner  follow- 
ing, to  wit : 

i.  By  exchanging  the  notes  so  redeemed  for  any  gold  coin 
in  the  general  fund  of  the  Treasury ; 

1  Act  of  February  12,  1873,  Sec.  14. 
2Q 


578  CONTEST  FOR  SOUND  MONEY 

2.  By  accepting  deposits  of  gold  coin  at  the  Treasury  or  at 
any  sub-treasury  in  exchange  for  the  United  States  notes  so 
redeemed ; 

3.  By  procuring  gold  coin  by  the  use  of  said  notes,  in  ac- 
cordance with  the  provisions  of  section  3700  of  the  Revised 
Statutes  of  the  United  States.1 

If  the  Secretary  of  the  Treasury  is  unable  to  restore  and 
maintain  the  gold  coin  in  the  reserve  fund  by  the  foregoing 
methods,  and  the  amount  of  such  gold  coin  and  bullion  in  said 
fund  shall  at  any  time  fall  below  $100,000,000,  then  it  shall 
be  his  duty  to  restore  the  same  to  the  maximum  sum  of 
$150,000,000  by  borrowing  money  on  the  credit  of  the  United 
States,  and  for  the  debt  thus  incurred  to  issue  and  sell  coupon 
or  registered  bonds  of  the  United  States,  in  such  form  as  he  may 
prescribe,  in  denominations  of  $50  or  any  multiple  thereof, 
bearing  interest  at  the  rate  of  not  exceeding  3  per  centum  per 
annum,  payable  quarterly,  such  bonds  to  be  payable  at  the 
pleasure  of  the  United  States  after  one  year  from  the  date 
of  their  issue,  and  to  be  payable,  principal  and  interest,  in  gold 
coin  of  the  present  standard  value,  and  to  be  exempt  from  the 
payment  of  all  taxes  or  duties  of  the  United  States,  as  well  as 
from  taxation  in  any  form  by  or  under  state,  municipal,  or  local 
authority ;  and  the  gold  coin  received  from  the  sale  of  said 
bonds  shall  first  be  covered  into  the  general  fund  of  the  Treasury 
and  then  exchanged,  in  the  manner  hereinbefore  provided,  for 
an  equal  amount  of  the  notes  redeemed  and  held  for  exchange, 
and  the  Secretary  of  the  Treasury  may,  in  his  discretion,  use 
said  notes  in  exchange  for  gold,  or  to  purchase  or  redeem  any 
bonds  of  the  United  States,  or  for  any  other  lawful  purpose  the 
public  interests  may  require,  except  that  they  shall  not  be  used 
to  meet  deficiencies  in  the  current  revenues.  That  United 
States  notes  when  redeemed  in  accordance  with  the  provisions 
of  this  section  shall  be  reissued,  but  shall  be  held  in  the  reserve 
fund  until  exchanged  for  gold,  as  herein  provided  ;  and  the  gold 
coin  and  bullion  in  the  reserve  fund,  together  with  the  redeemed 
notes  held  for  use  as  provided  in  this  section,  shall  at  no  time 
exceed  the  maximum  sum  of  $150,000,000. 

Sec.  3.  That  nothing  contained  in  this  act  shall  be  construed 
to  affect  the  legal  tender  quality  as  now  provided  by  law  of  the 
silver  dollar,  or  of  any  other  money  coined  or  issued  by  the 
United  States. 

Sec.  4.  That  there  shall  be  established  in  the  Treasury  De- 
partment, as  a  part  of  the  office  of  the  Treasurer  of  the  United 

!Act  of  March  17,  1862. 


APPENDIX  579 

States,  divisions  to  be  designated  and  known  as  the  division 
of  issue  and  the  division  of  redemption,  to  which  shall  be  as- 
signed, respectively,  under  such  regulations  as  the  Secretary  of 
the  Treasury  may  approve,  all  records  and  accounts  relating  to 
the  issue  and  redemption  of  United  States  notes,  gold  certifi- 
cates, silver  certificates,  and  currency  certificates.  There  shall 
be  transferred  from  the  account  of  the  general  fund  of  the 
Treasury  of  the  United  States,  and  taken  up  on  the  books  of  said 
divisions,  respectively,  accounts  relating  to  the  reserve  fund  for 
the  redemption  of  United  States  notes  and  Treasury  notes,  the 
gold  coin  held  against  outstanding  gold  certificates,  the  United 
States  notes  held  against  outstanding  currency  certificates,  and 
the  silver  dollars  held  against  outstanding  silver  certificates,  and 
each  of  the  funds  represented  by  these  accounts  shall  be  used 
for  the  redemption  of  the  notes  and  certificates  for  which  they 
are  respectively  pledged,  and  shall  be  used  for  no  other  pur- 
pose, the  same  being  held  as  trust  funds. 

Sec.  5.  That  it  shall  be  the  duty  of  the  Secretary  of  the 
Treasury,  as  fast  as  standard  silver  dollars  are  coined  under  the 
provisions  of  the  Acts  of  July  14,  1890,  and  June  13,  1898, 
from  bullion  purchased  under  the  Act  of  July  14, 1890,10  retire 
and  cancel  an  equal  amount  of  Treasury  notes  whenever  received 
into  the  Treasury,  either  by  exchange  in  accordance  with  the  pro- 
visions of  this  Act  or  in  the  ordinary  course  of  business,  and 
upon  the  cancellation  of  Treasury  notes  silver  certificates  shall 
be  issued  against  the  silver  dollars  so  coined. 

Sec.  6.  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized and  directed  to  receive  deposits  of  gold  coin  with  the 
Treasurer  or  any  assistant  treasurer  of  the  United  States  in  sums 
of  not  less  than  $20,  and  to  issue  gold  certificates  therefor  in 
denominations  of  not  less  than  #20,  and  the  coin  so  deposited 
shall  be  retained  in  the  Treasury  and  held  for  the  payment  of 
such  certificates  on  demand,  and  used  for  no  other  purpose. 
Such  certificates  shall  be  receivable  for  customs,  taxes,  and  all 
public  dues,  and  when  so  received  may  be  reissued,  and  when 
held  by  any  national  banking  association  may  be  counted  as  a 
part  of  its  lawful  reserve  :  Provided,  That  whenever  and  so  long 
as  the  gold  coin  held  in  the  reserve  fund  in  the  Treasury  for  the 
redemption  of  United  States  notes  and  Treasury  notes  shall  fall 
and  remain  below  $100,000,000,  the  authority  to  issue  certifi- 
cates as  herein  provided  shall  be  suspended  :  And  provided  fur- 
ther, That  whenever  and  so  long  as  the  aggregate  amount  of 
United  States  notes  and  silver  certificates  in  the  general  fund 
of  the  Treasury  shall  exceed  $60,000,000  the  Secretary  of  the 
Treasury  may,  in  his  discretion,  suspend  the  issue  of  the  certifi- 


580  CONTEST  FOR  SOUND  MONEY 

cates  herein  provided  for:  And  provided  further,  That  of  the 
amount  of  such  outstanding  certificates  one-fourth  at  least  shall 
be  in  denominations  of  $50  or  less:  And  provided  further. 
That  the  Secretary  of  the  Treasury  may,  in  his  discretion,  issue 
such  certificates  in  denominations  of  $10,000,  payable  to  order. 
And  section  5193  of  the  Revised  Statutes  of  the  United  States1 
is  hereby  repealed. 

Sec.  7.  That  hereafter  silver  certificates  shall  be  issued  only 
of  denominations  of  $10  and  under,  except  that  not  exceeding 
in  the  aggregate  10  per  centum  of  the  total  volume  of  said  cer- 
tificates, in  the  discretion  of  the  Secretary  of  the  Treasury,  may 
be  issued  in  denominations  of  $20,  $50,  and  $100;  and  silver 
certificates  of  higher  denomination  than  $10,  except  as  herein 
provided,  shall,  whenever  received  at  the  Treasury  or  redeemed, 
be  retired  and  canceled,  and  certificates  of  denominations  of 
#10  or  less  shall  be  substituted  therefor,  and  after  such  substi- 
tution, in  whole  or  in  part,  a  like  volume  of  United  States  notes 
of  less  denomination  than  $10  shall  from  time  to  time  be  retired 
and  canceled,  and  notes  of  denominations  of  $10  and  upward 
shall  be  reissued  in  substitution  therefor,  with  like  qualities  and 
restrictions  as  those  retired  and  canceled. 

Sec.  8.  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized to  use,  at  his  discretion,  any  silver  bullion  in  the  Treasury 
of  the  United  States  purchased  under  the  Act  of  July  14,  1890, 
for  coinage  into  such  denominations  of  subsidiary  silver  coin  as 
may  be  necessary  to  meet  the  public  requirements  for  such 
coin  :  Provided,  That  the  amount  of  subsidiary  silver  coin  out- 
standing shall  not  at  any  time  exceed  in  the  aggregate  $100,- 
000,000.  Whenever  any  silver  bullion  purchased  under  the 
Act  of  July  14,  1890,  shall  be  used  in  the  coinage  of  subsidiary 
silver  coin  an  amount  of  Treasury  notes  issued  under  said  Act 
equal  to  the  cost  of  the  bullion  contained  in  such  coin  shall  be 
canceled  and  not  reissued. 

Sec.  9.  That  the  Secretary  of  the  Treasury  is  hereby  au- 
thorized and  directed  to  cause  all  worn  and  uncurrent  subsidiary 
silver  coin  of  the  United  States  now  in  the  Treasury,  and  here- 
after received  to  be  recoined,  and  to  reimburse  the  Treasurer 
of  the  United  States  for  the  difference  between  the  nominal 
or  face  value  of  such  coin  and  the  amount  the  same  will  pro- 
duce in  new  coin  from  any  moneys  in  the  Treasury  not  other- 
wise appropriated. 

Sec.  10.  That  section  5138  of  the  Revised  Statutes2  is 
hereby  amended  so  as  to  read  as  follows  : 

1  Act  of  June  8,  1872. 

a  Sec.  7,  Act  of  June  3,  1864. 


APPENDIX  581 

"Section  5138.  No  association  shall  be  organized  with  a  less 
capital  than  $100,000,  except  that  banks  with  a  capital  of  not 
less  than  $50,000  may,  with  the  approval  of  the  Secretary  of 
the  Treasury,  be  organized  in  any  place  the  population  of 
which  does  not  exceed  6,000  inhabitants,  and  except  that 
banks  with  a  capital  of  not  less  than  $25,000  may,  with  the 
sanction  of  the  Secretary  of  the  Treasury,  be  organized  in  any 
place  the  population  of  which  does  not  exceed  3,000  inhabit- 
ants. No  association  shall  be  organized  in  a  city  the  popula- 
tion of  which  exceeds  50,000  persons  with  a  capital  of  less 
than  $200,000." 

Sec.  11.  That  the  Secretary  of  the  Treasury  is  hereby 
authorized  to  receive  at  the  Treasury  any  of  the  outstanding 
bonds  of  the  United  States  bearing  interest  at  5  per  centum  per 
annum,  payable  February  1,  1904,  and  any  bonds  of  the 
United  States  bearing  interest  at  4  per  centum  per  annum, 
payable  July  1,  1907,  and  any  bonds  of  the  United  States 
bearing  interest  at  3  per  cent,  per  annum,  payable  August  1, 
1908,  and  to  issue  in  exchange  therefor  an  equal  amount  of 
coupon  or  registered  bonds  of  the  United  States,  in  such  form 
as  he  may  prescribe,  in  denominations  of  $50  or  any  multiple 
thereof,  bearing  interest  at  the  rate  of  2  per  centum  per 
annum,  payable  quarterly,  such  bonds  to  be  payable  at  the 
pleasure  of  the  United  States  after  thirty  years  from  the  date 
of  their  issue,  and  said  bonds  to  be  payable,  principal  and 
interest,  in  gold  coin  of  the  present  standard  value,  and  to* 
be  exempt  from  the  payment  of  all  taxes  or  duties  of  the 
United  States,  as  well  as  from  taxation  in  any  form  by  or  under 
state,  municipal,  or  local  authority  :  Provided,  That  such  out- 
standing bonds  may  be  received  in  exchange  at  a  valuation  not 
greater  than  their  present  worth  to  yield  an  income  of  2\  per 
centum  per  annum  ;  and  in  consideration  of  the  reduction  in 
interest  effected,  the  Secretary  of  the  Treasury  is  authorized  to 
pay  to  the  holders  of  the  outstanding  bonds  surrendered  for 
exchange,  out  of  any  money  in  the  Treasury  not  otherwise 
appropriated,  a  sum  not  greater  than  the  difference  between 
their  present  worth,  computed  as  aforesaid,  and  their  par  value, 
and  the  payments  to  be  made  hereunder  shall  be  held  to  be 
payments  on  account  of  the  sinking  fund  created  by  section 
3694  of  the  Revised  Statutes.1  And  provided  further,  That 
the  2  per  centum  bonds  to  be  issued  under  the  provisions  of 
this  Act  shall  be  issued  at  not  less  than  par,  and  they  shall  be 
numbered  consecutively  in  the  order  of  their  issue,  and  when 

1  Act  of  February  25,  1862. 


582  CONTEST  FOR  SOUND  MONEY 

< 

payment  is  made  the  last  numbers  issued  shall  be  first  paid,  and 
this  order  shall  be  followed  until  all  the  bonds  are  paid,  and 
whenever  any  of  the  outstanding  bonds  are  called  for  payment, 
interest  thereon  shall  cease  three  months  after  such  call ;  and 
there  is  hereby  appropriated  out  of  any  money  in  the  Treasury 
not  otherwise  appropriated,  to  effect  the  exchanges  of  bonds  pro- 
vided for  in  this  Act,  a  sum  not  exceeding  one-fifteenth  of  i  per 
centum  of  the  face  value  of  said  bonds,  to  pay  the  expense  of  pre- 
paring and  issuing  the  same,  and  other  expenses  incident  thereto. 
Sec.  12.  That  upon  the  deposit  with  the  Treasurer  of  the 
United  States,  by  any  national  banking  association,  of  any 
bonds  of  the  United  States  in  the  manner  provided  by  existing 
law,  such  association  shall  be  entitled  to  receive  from  the 
Comptroller  of  the  Currency  circulating  notes  in  blank, 
registered,  and  countersigned  as  provided  by  law,  equal  in 
amount  to  the  par  value  of  the  bonds  so  deposited ;  and  any 
national  banking  association  now  having  bonds  on  deposit  for 
the  security  of  circulating  notes,  and  upon  which  an  amount  of 
circulating  notes  has  been  issued  less  than  the  par  value  of  the 
bonds,  shall  be  entitled,  upon  due  application  to  the  Comp- 
troller of  the  Currency,  to  receive  additional  circulating  notes 
in  blank  to  an  amount  which  will  increase  the  circulating  notes 
held  by  such  association  to  the  par  value  of  the  bonds  de- 
posited, such  additional  notes  to  be  held  and  treated  in  the 
same  way  as  circulating  notes  of  national  banking  associations 
heretofore  issued,  and  subject  to  all  the  provisions  of  law  affect- 
ing such  notes  :  Provided,  That  nothing  herein  contained  shall 
be  construed  to  modify  or  repeal  the  provisions  of  section  5167 
of  the  Revised  Statutes  of  the  United  States,1  authorizing  the 
Comptroller  of  the  Currency  to  require  additional  deposits  of 
bonds  or  of  lawful  money  in  case  the  market  value  of  the 
bonds  held  to  secure  the  circulating  notes  shall  fall  below  the 
par  value  of  the  circulating  notes  outstanding  for  which  such 
bonds  may  be  deposited  as  security:  And  provided  further, 
That  the  circulating  notes  furnished  to  national  banking  associa- 
tions under  the  provisions  of  this  act  shall  be  of  the  denomi- 
nations prescribed  by  law,  except  that  no  national  banking 
association  shall,  after  the  passage  of  this  act,  be  entitled  to 
receive  from  the  Comptroller  of  the  Currency,  or  to  issue  or 
reissue  or  place  in  circulation,  more  than  one-third  in  amount 
of  its  circulating  notes  of  the  denomination  of  $5  :  And  pro- 
vided further,  That  the  total  amount  of  such  notes  issued  to 
any  such  association  may  equal  at  any  time  but  shall  not  ex- 

1  Sec.  26,  Act  of  June  3,  1864. 


APPENDIX  583 

ceed  the  amount  at  such  time  of  its  capital  stock  actually  paid 
in:  And  provided  further,  That  under  regulations  to  be  pre- 
scribed by  the  Secretary  of  the  Treasury,  any  national  banking 
association  may  substitute  the  2  per  centum  bonds  issued  under 
the  provisions  of  this  act  for  any  of  the  bonds  deposited  with 
the  Treasurer  to  secure  circulation  or  to  secure  deposits  of 
public  money ;  and  so  much  of  an  Act  entitled  "  An  Act  to 
enable  national  banking  associations  to  extend  their  corporate 
existence,  and  for  other  purposes,"  approved  July  12,  1882,  as 
prohibits  any  national  bank  which  makes  any  deposit  of  lawful 
money  in  order  to  withdraw  its  circulating  notes  from  receiving 
any  increase  of  its  circulation  for  the  period  of  6  months 
from  the  time  it  made  such  deposit  of  lawful  money  for  the 
purpose  aforesaid,  is  hereby  repealed,  and  all  other  Acts  or 
parts  of  Acts  inconsistent  with  the  provisions  of  this  section 
are  hereby  repealed. 

Sec.  13.  That  every  national  banking  association  having  on 
deposit,  as  provided  by  law,  bonds  of  the  United  States  bearing 
interest  at  the  rate  of  2  per  centum  per  annum,  issued  under 
the  provision  of  this  Act,  to  secure  its  circulating  notes,  shall 
pay  to  the  Treasurer  of  the  United  States,  in  the  months  of 
January  and  July,  a  tax  of  one-fourth  of  1  per  centum  each  half 
year  upon  the  average  amount  of  such  of  its  notes  in  circulation 
as  are  based  upon  the  deposit  of  said  2  per  centum  bonds ; 
and  such  taxes  shall  be  in  lieu  of  existing  taxes  on  its  notes  in 
circulation  imposed  by  section  5214  of  the  Revised  Statutes.1 

Sec.  14.  That  the  provisions  of  this  Act  are  not  intended  to 
preclude  the  accomplishment  of  international  bimetallism  when- 
ever conditions  shall  make  it  expedient  and  practicable  to 
secure  the  same  by  concurrent  action  of  the  leading  com- 
mercial nations  of  the  world,  and  at  a  ratio  which  shall  insure 
permanence  of  relative  value  between  gold  and  silver. 

The  Act  of  April  12,  1902,  authorized  the  further  extension 
of  charters  of  national  banks  for  a  period  of  20  years. 


III.   DOCUMENTS 


THOMAS  JEFFERSON'S  NOTES  ON  THE  ESTABLISHMENT  OF 
A  MONEY  UNIT  AND  OF  A  COINAGE  FOR  THE  UNITED 
STATES 

1782 

In  fixing  the  unit  of  money  these  circumstances  are  of  princi- 
pal importance. 

1  Sec.  41,  Act  of  June  3,  1864. 


584  CONTEST  FOR  SOUND  MONEY 

1.  That  it  be  of  a  convenient  size  to  be  applied  as  a  measure 
to  the  common  money  transactions  of  life. 

2.  That  its  parts  and  multiples  be  in  an  easy  proportion  to 
each  other  so  as  to  facilitate  the  Money  Arithmetic. 

3.  That  the  Unit  and  its  parts  or  divisions  be  so  nearly  of  the 
value  of  some  of  the  known  coins  as  that  they  may  be  of  easy 
adoption  for  the  people. 

The  Spanish  Dollar  seems  to  fulfill  all  these  conditions. 

1.  Taking  into  our  view  all  money  transactions  great  and 
small,  I  question  if  a  common  measure  of  more  convenient  size 
than  the  dollar  could  be  proposed.  The  value  of  100.  1,000. 
10,000  dollars  is  well  estimated  by  the  mind;  so  is  that  of  the 
10th  or  the  hundredth  of  a  dollar.  Few  transactions  are  above 
or  below  these  limits.  The  expediency  of  attending  to  the  size 
of  the  money  Unit  will  be  evident  to  any  one  who  will  consider 
how  inconvenient  it  would  be  to  a  manufacturer  or  merchant,  if 
instead  of  the  yard  for  measuring  cloth,  either  the  inch  or  the 
mill  had  been  made  the  unit  of  measure. 

2.  The  most  easy  ratio  of  multiplication  and  division  is  that 
by  ten.  Every  one  knows  the  facility  of  decimal  arithmetic. 
Every  one  remembers  that  when  learning  money  arithmetic,  he 
used  to  be  puzzled  with  adding  the  farthings,  taking  out  the 
fours  and  carrying  them  on,  adding  the  pence,  taking  out  the 
twelves  and  carrying  them  on  ;  adding  the  shillings,  taking  out 
the  twenties  and  carrying  them  on ;  but  when  he  came  to  the 
pounds,  when  he  had  only  tens  to  carry  forward,  it  was  easy  & 
free  from  error. 

The  bulk  of  mankind  are  school-boys  thro'  life.  These  little 
perplexities  are  always  great  to  them.  And  even  mathematical 
heads  feel  the  relief  of  an  easier  substituted  for  a  more  difficult 
process.  Foreigners,  too  who  have  trade  or  who  travel  among^ 
us  will  find  a  great  facility  in  understanding  our  coins  and 
accounts  from  this  ratio  of  subdivision.  Those  who  have  had 
occasion  to  convert  the  livres,  sols  and  deniers  of  the  French, 
the  Gilders  Stivers  and  penings  of  the  Dutch,  the  pounds,  shil- 
lings, pence  and  farthings  of  these  several  states  into  each  other 
can  judge  how  much  they  would  have  been  aided  had  their 
several  subdivisions  been  in  a  decimal  ratio.  Certainly  in  all 
cases  where  we  are  free  to  chuse  between  easy  and  difficult 
modes  of  operation,  it  is  most  rational  to  chuse  the  easy.  The 
financier *  therefore  in  his  report  well  proposes  that  our  coins 
should  be  in  decimal  proportions  to  one  another.  If  we  adopt 
the  dollar  for  our  unit,  we  should  strike  four  coins,  one  of  gold, 
two  of  silver  and  one  of  copper  viz 

1  Robert  Morris. 


APPENDIX 


585 


1.  A  Golden  piece  equal  in  value  to  10  dollars. 

2.  The  unit  or  dollar  itself,  of  silver. 

3.  The  tenth  of  a  dollar,  of  silver  also. 

4.  The  hundredth  of  a  dollar  of  copper. 

Compare  the  arithmetical  operations  on  the  same  sum  of 
money  expressed  in  this  form,  &  expressed  in  the  pound  ster- 
ling and  its  divisions : 


Addition. 

£   s.     d.        [Dollars.] 
8  13  11}  =  38.65 
4  12    8f  =  20.61 

Subtraction. 

£   s.     d.        [Dollars.] 

8  13  11}  =  38.65 
4  12     8f  =  20.61 

13    6    &± 

MULTIPLICA 
[£    s. 

8  13 

20 

173 

12 

2087  or 
4 

8350 
8 

=  59 

TION 

d.  qn 
11}  = 

.26 

BY  8. 

>.  Dollars.] 
=  38.65 
8 

4     1     2f 
Divisioi 

[£    s.    d.    c 

8  13  11} 
20 

173 

12 

2087 
4 

8)8350 
4)1043$ 

12)2601 
20)21.8 
U]i.i.8| 

=  18.04 
«  by  8. 

[rs.  Dollars.] 
=  38.65 

8) 

4.83 

309.2  D 

8  13."} 
8 

69  11     8 

66800 

1 

rV 

16700 
1391  8 
M69  11  8 

A  bare  inspection  of  the  above  operation  will  evince  the 
labour  which  is  occasioned  by  subdividing  the  unit  into  2oths 
24oths  and  960th"  as  the  English  do  and  as  we  have  done  ;  and  the 
case  of  subdivisions  in  a  decimal  ratio.  The  same  difference 
arises  in  making  payment.  An  Englishman  to  pay  £&. 13.  n£ 
must  find  by  calculation  what  combination  of  the  coins  of  His 
country  will  pay  this  sum.  But  an  American  having  the  same 
sum  to  pay  thus  expressed  38.65  will  know  by  inspection  only 
that  three  golden  pieces  8  units  or  dollars  6  tenths  and  5  cop- 
pers pay  it  precisely. 

3  The  third  condition  required  is  that  the  unit,  its  multiples 
and  subdivisions  coincide  in  value  with  some  of  the  known  coin 
so  nearly,  that  the  people  may  by  a  quick  reference  in  the  mind 


586  CONTEST  FOR  SOUND  MONEY 

estimate  their  value.  If  this  be  not  attended  to,  they  will  be 
very  long  in  adopting  the  innovation,  if  ever  they  adopt  it.  Let 
us  examine  in  this  point  of  view  each  of  the  four  coins  proposed. 
i.  The  golden  piece  will  be  \  more  than  a  half  Joe *  and  y1^  more 
than  a  double  guinea.  It  will  be  readily  estimated  then  by  refer- 
ence to  either  of  them  but  more  readily  and  accurately  as  equal 
to  10  dollars. 

2  The  unit  or  dollar  is  a  known  coin  and  the  most  familiar 
of  all  to  the  mind,  of  the  people.  It  is  already  adopted  from 
South  to  North,  has  identified  our  currency  and  therefore 
happily  offers  itself  as  an  Unit  already  introduced.  Our  public 
debt,  our  requisitions  and  their  apportionments  have  given  it 
actual  and  long  possession  of  the  place  of  Unit.  The  course  of 
our  commerce  too  will  bring  us  more  of  this  than  of  any  other 
foreign  coin,  and  therefore  renders  it  more  worthy  of  attention. 
I  know  of  no  Unit  which  can  be  proposed  in  competition  with 
the  dollar,  but  the  pound:  But  what  is  the  pound?  1547 
grains  of  fine  silver  in  Georgia:  1289  grains  in  Virginia,  Con- 
necticut, Rhode  Island,  Massachusetts  and  New  Hampshire ; 
I°3Ii  grains  in  Maryland,  Delaware  Pennsylvania  and  New 
Jersey  ;  966I  grains  in  North  Carolina  and  New  York. 

Which  of  these  shall  we  adopt  ?  To  which  State  give  that 
pre-eminence  of  which  all  are  so  jealous  ?  And  on  which  im- 
pose the  difficulties  of  a  new  estimate  for  their  coin,  their  cattle 
and  other  commodities?  Or  shall  we  hang  the  pound  sterling 
as  a  common  badge  about  all  their  necks  ?  This  contains  1 7i8| 
grains  of  pure  silver.  It  is  difficult  to  familiarise  a  new  coin  to 
a  people.  It  is  more  difficult  to  familiarise  them  to  a  new  coin 
with  an  old  name.  Happily  the  Dollar  is  familiar  to  them  all, 
and  is  already  as  much  referred  to  for  a  measure  of  value  as 
their  respective  State  [provincial]  pounds. 

3.  The  tenth  will  be  precisely  the  Spanish  bit  or  half  pistreen 
in  some  of  the  States,  and  in  others  will  differ  from  it  but  a  very 
small  fraction.  This  is  a  coin  perfectly  familiar  to  us  all.  When 
we  shall  make  a  new  coin  then  equal  in  value  to  this,  it  will  be 
of  ready  estimate  with  the  people. 

4.  The  hundredth  or  copper  will  be  very  nearly  the  penny 
or  copper  of  New  York  and  North  Carolina,  this  being  ^  of  a 
dollar,  and  will  not  be  very  different  from  the  penny  or  copper 
of  New  Jersey,  Pennsylvania,  Delaware,  and  Maryland,  which 
is  J§  of  a  dollar.  It  will  be  about  the  medium  between  the  old 
and  the  new  coppers  of  these  States  and  therefore  will  soon  be 

1  The  "  Half- Joe,"  or  piece  of  6400  rees  was  a  Portuguese  coin  22  carats 
fine  weighing  one-half  ounce  of  Portugal  equal  to  about  221  grains  Troy. 


'APPENDIX  587 

substituted  for  them  both.  In  Virginia  coppers  have  never 
been  in  use.  It  will  be  as  easy  therefore  to  introduce  them 
there  of  one  value  as  of  another.  The  copper  coin  proposed 
will  be  nearly  equal  to  three-fourths  of  their  penny  which  is  the 
same  with  the  penny  lawful  of  the  Eastern  States.  A  great 
deal  of  small  change  is  useful  in  a  State,  and  tends  to  reduce 
the  prices  of  small  articles.  Perhaps  it  would  not  be  amiss, 
coin  three  more  pieces  of  silver,  one  of  the  value  of  five- 
tenths  or  half  a  dollar,  one  of  the  value  of  two  tenths,  which 
would  be  equal  to  the  Spanish  pistreen,  and  one  of  the  value 
of  5  coppers,  which  would  be  equal  to  the  Spanish  half  bit. 
We  should  then  have  four  silver  coin  viz  : 

1.  The  Unit  or  Dollar 

2.  The  half  dollar  or  five  tenths 

3.  The  double  tenth,  equal  to  2  [tenths]  or  \  of  a  dollar  [or] 
to  a  pistreen. 

4.  The  tenth,  equal  to  a  Spanish  bit 

5.  The  five  copper  piece  equal  to  05  or  -^  of  a  dollar  or  to 
the  half  bit. 

The  plan  reported  by  the  financier  is  worthy  of  his  sound 
judgment.  It  admits  however  of  objection  in  the  size  of  the 
unit.  He  proposes  that  this  shall  be  the  1440th  part  of  a  dol- 
lar; so  that  it  will  require  1440  of  his  units  to  make  them  the 
one  before  proposed.  He  was  led  to  adopt  this  by  a  mathe- 
matical attention  to  our  old  currencies,  all  of  which  this  unit 
will  measure  without  leaving  a  fraction.  But  as  our  object  is 
to  get  rid  of  those  currencies,  the  advantage  derived  from  this 
coincidence  will  soon  be  past.  Whereas  the  inconveniences  of 
this  unit  will  forever  remain,  if  they  do  not  altogether  prevent 
its  introduction.  It  is  defective  in  two  of  the  three  requisites 
of  a  money  Unit. 

1.  It  is  inconvenient  in  its  application  to  the  ordinary  money 
transactions.  10.000  dollars  will  require  8  figures  to  express 
them,  to  wit,  14,400,000.  A  horse  or  bullock  of  80  dollars 
value  will  require  a  notation  of  six  figures  to  wit  115,200  units. 
As  a  money  of  account  this  will  be  laborious  even  when  facili- 
tated by  the  aid  of  decimal  arithmetic.  As  a  common  measure 
of  the  value  of  property  it  will  be  too  minute  to  be  compre- 
hended by  the  people.  The  French  are  subjected  to  very  labo- 
rious calculations,  the  livre  being  their  ordinary  money  of 
account,  and  this  but  between  the  \  &  £  of  a  dollar.  But 
what  will  be  our  labours  should  our  money  of  account  be  y-fYff 
of  a  dollar  only  ? 

2.  It  is  neither  equal  nor  near  to  any  of  the  known  coins  in 
value. 


588  CONTEST  FOR  SOUND  MONEY 

If  we  determine  that  a  dollar  shall  be  our  Unit,  we  must  then 
say  with  precision  what  a  dollar  is.  This  coin  as  struck  at  dif- 
ferent times,  of  different  weights  and  fineness  is  of  different  val- 
ues. Sir  Isaac  Newton's  Assay  and  representation  to  the  lords 
of  the  treasury  in  1 7 1 7  of  those  which  he  examined  make  their 
values,  as  follows 

dwt  grs                          grains 

The  Seville  piece  of  eight      .     .     17.  12    containing  387      of  pure  silver. 

The  Mexico  piece  of  eight     .     .     17.  io|  containing  385J    of  pure  silver. 

The  Pillar  piece  of  eight    ...     17.  9    containing  385!    of  pure  silver. 

The  new  Seville  piece  of  eight  .     14.  containing  308^  of  pure  silver. 

The  financier  states  the  old  dollar  as  containing  376  grains 
of  fine  silver  and  the  new  365  grains.  If  the  dollars  circulating 
among  us  be  of  every  date  equally,  we  should  examine  the 
quantity  of  pure  metal  in  each  and  from  them  form  an  average 
for  our  Unit.  This  is  a  work  proper  to  be  committed  to  Mathe- 
maticians as  well  as  merchants  and  which  should  be  decided  on 
actual  and  accurate  experiment. 

The  quantum  of  alloy  is  also  to  be  decided.  Some  is  neces- 
sary to  prevent  the  coin  from  wearing  too  fast.  Too  much  fills 
our  pockets  with  coppers  instead  of  silver.  The  silver  coins 
assayed  by  Sir  Isaac  Newton  varied  from  i4  to  76  pennyweight 
alloy  in  the  pound  troy  of  mixed  metal.  The  British  standard 
has  18  dwt.  The  Spanish  coins  assayed  by  Sir  Isaac  Newton 
have  from  18  to  19^  dwt.  The  new  French  crown  has  in  fact 
19^,  though  by  edict  it  should  have  20  dwt,  that  is  y1^-.  The 
taste  of  our  countrymen  will  require  that  the  [their]  furniture 
plate  should  be  as  good  as  the  British  standard.  Taste  cannot 
be  controuled  by  law.  Let  it  then  give  the  law  in  a  point, 
which  is  indifferent  to  a  certain  degree.  Let  the  Legislatures 
fix  the  alloy  of  furniture  plate  at  18  dwt.  the  British  standard, , 
and  Congress  that  of  their  coin  at  one  ounce  in  the  pound,  the 
French  standard.  This  proportion  has  been  found  convenient 
for  the  alloy  of  gold  coin  and  it  will  simplify  the  system  of  our 
mint  to  alloy  both  metals  in  the  same  degree.  [The  coin  too 
being  the  least  pure  will  be  less  easily  melted  into  plate.] 
These  reasons  are  light  indeed  and  of  course  will  only  weigh, 
if  no  heavier  ones  can  be  opposed  to  them. 

The  proportion  between  the  values  of  gold  and  silver  is  a 
mercantile  problem  altogether.  It  would  be  inaccurate  to  fix 
it  by  the  popular  exchanges  of  a  half  Joe  for  eight  dollars,  a 
Louis  for  4  French  crowns  or  five  Louis  for  23  dollars.  The 
first  of  these  would  be  to  adopt  the  Spanish  proportion  between 
gold  and  silver ;  the  second  the  French,  the  third  a  mere  pop- 
ular barter,  wherein  convenience  is  consulted  more  than  accu- 


APPENDIX  589 

racy.  The  legal  proportion  in  Spain  is  16  for  1.  in  England 
15^  for  1.  in  France  15  for  1.  The  Spaniards  and  English 
are  found  in  experience  to  retain  an  over  proportion  of  gold 
coins  and  to  lose  their  silver.  The  French  have  a  greater 
proportion  of  silver.  The  difference  at  market  has  been  on 
the  decrease.     The  financier  states  it  at  present  at  14^  for  1. 

Just  principles  will  lead  us  to  disregard  legal  proportions 
altogether  ;  to  enquire  into  the  market  price  of  gold  in  the  sev- 
eral countries  with  which  we  shall  principally  be  connected  in 
commerce,  and  to  take  an  average  from  them.  Perhaps  we 
might  with  safety  lean  to  a  proportion  somewhat  above  par  for 
gold,  considering  our  neighbourhood  and  commerce  with  the 
sources  of  the  coins  and  the  tendency  which  the  high  price  of 
gold  in  Spain  has  to  draw  thither  all  that  of  their  mines,  leav- 
ing silver  principally  for  our  and  other  markets.  It  is  not 
impossible  that  15  for  1  may  be  found  an  eligible  proportion. 
I  state  it  however  as  conjectural  only. 

As  to  the  alloy  for  gold  coin,  the  British  is  an  ounce  in  the 
pound ;  the  French,  Spanish  and  Portugese  differ  from  that 
only  from  \  of  a  grain  [to  a  grain]  and  a  half.  I  should 
therefore  prefer  the  British,  merely  because  its  fraction  stands 
in  a  more  simple  form  and  facilitates  the  calculations  into 
which  it  enters. 

Should  the  unit  be  fixed  at  365  grains  of  pure  silver  gold  at 
15  for  1,  and  the  alloy  of  both  be  one-twelfth,  the  weight  of  the 
coins  will  be  as  follows. 

Grains.  Grains.                                Dwt.  Grs. 

The  gold  piece  cont'g      ....  243$  pure  metal,  22.12    of  alloy  will  weigh  11 :      145 

The  unit,  or  dollar 365    pure  metal,  33.18    of  alloy  will  weigh  16:  14.18 

The  half  doll.,  or  5-tenths    .     .     .  182^  pure  metal,  16.59    of  alloy  will  weigh    8:     7.09 

The  fifth,  or  pistreen 73    pure  metal,    6.63    of  alloy  will  weigh    3:     7.63 

The  tenth,  or  bit 36J  pure  metal,    3.318  of  alloy  will  weigh    1:  15.818 

The  twentieth,  or  half-bit    .     .     .  184  pure  metal,    1.659  of  alloy  will  weigh  IQ-9 

The  quantity  of  fine  silver,  which  shall  constitute  the  unit 
being  settled  and  the  proportion  of  the  value  of  gold  to  that  of 
silver ;  a  table  should  be  formed  from  the  assay  before  sug- 
gested, classing  the  several  foreign  coins  according  to  their 
fineness,  declaring  the  worth  of  a  pennyweight  or  grain  in  each 
class  and  that  they  shall  be  lawful  tender  at  those  rates  if  not 
clipped  or  otherwise  diminished,  and  where  diminished  offer- 
ing their  value  for  them  at  the  mint,  deducting  the  expence  of 
recoinage.  Here  the  legislatures  should  co-operate  with  Con- 
gress in  providing  that  no  money  be  received  or  paid  at  their 
treasuries  or  by  any  of  their  officers  or  any  bank  but  on  actual 
weight ;   in  making  it  criminal  in  a  high  degree  to.  diminish 


590  CONTEST  FOR  SOUND  MONEY 

their  own  coins  and  in  some  smaller  degree  to  offer  them  in 
payment  when  diminished. 

That  this  subject  may  be  properly  prepared  and  in  readiness 
for  Congress  to  take  up  at  their  meeting  in  November,  some- 
thing must  now  be  done.  The  present  session  drawing  to  a 
close  they  probably  would  not  choose  to  enter  far  into  this 
undertaking  themselves.  The  Committee  of  the  States  how- 
ever, during  the  recess,  will  have  time  to  digest  it  thoroughly, 
if  Congress  will  fix  some  general  principles  for  their  govern- 
ment. 

Suppose  then  they  be  instructed  — 

To  appoint  proper  persons  to  assay  and  examine  with  the 
utmost  accuracy  practicable  the  Spanish  milled  dollars  of 
different  dates  in  circulation  with  us. 

To  assay  and  examine  in  like  manner  the  fineness  of  all  the 
other  coins  which  may  be  found  in  circulation  within  these 
states. 

To  receive  and  lay  before  Congress  the  reports  on  the  result 
of  these  assays. 

To  appoint  also  proper  persons  to  enquire  what  are  the  pro- 
portions between  the  values  of  fine  gold  and  fine  silver  at  the 
markets,  of  the  several  countries  with  which  we  are  or  probably 
may  be  connected  in  commerce  and  what  would  be  the  proper 
proportion  here,  having  regard  to  the  average  of  their  values 
at  those  markets  and  to  other  circumstances,  and  to  report  the 
same  to  the  Committee  to  be  by  them  laid  before  Congress. 

To  prepare  an  Ordinance  for  establishing  the  Unit  of  money 
within  these  states ;  for  subdividing  it  and  for  striking  coins  of 
gold,  silver  and  copper  on  the  following  principles  , 

That  the  money  unit  of  these  States  shall  be  equal  in  value 
to  a  Spanish  milled  dollar  containing  so  much  fine  silver  as  the 
assay  before  directed  shall  show  to  be  contained,  on  an  aver- 
age in  dollars  of  the  several  dates  circulating  with  us. 

That  this  Unit  shall  be  divided  into  tenths  and  hundredths, 

That  there  shall  be  a  coin  of  silver  of  the  value  of  an  Unit. 
One  other  of  the  same  metal  of  the  value  of  one-tenth  of  an 
unit.  One  other  of  copper  of  the  value  of  the  hundredth  of  an 
unit.  That  there  shall  be  a  coin  of  gold  of  the  value  of  ten 
Units,  according  to  the  report  before  directed  and  the  judg- 
ment of  the  Committee  thereon. 

That  the  alloy  of  the  said  coins  of  gold  and  silver  shall  be 
equal  in  weight  to  one  eleventh  part  of  the  fine  metal. 

That  there  be  proper  devices  for  these  coins. 

That  measures  be  proposed  for  preventing  their  diminution 
and  also  their  currency  and  that  of  any  others  when  diminished. 


APPENDIX  591 

That  the  several  foreign  coins  be  described  and  classed  in 
the  said  ordinance,  the  fineness  of  each  class  stated  and  its 
value  by  weight  estimated  in  Units  and  decimal  parts  of  an 
Unit,  and  that  the  said  draught  of  an  Ordinance  be  reported 
to  Congress  at  their  next  meeting  for  their  consideration  and 
determination. 


REPORT  OF  ALEXANDER  HAMILTON  ON  THE  ESTABLISH- 
MENT OF  A  MINT,  TO  THE  HOUSE  OF  REPRESENTA- 
TIVES  OF  THE   UNITED   STATES,   MAY   5,  1791 

The  Secretary  of  the  Treasury  having  attentively  considered  the 
subject  referred  to  him  by  the  order  of  the  House  of  Rep- 
resentatives, of  the  fifteenth  day  of  April  last,  relative  to 
the  establishment  of  a  Mint,  most  respectfully  submits  the 
result  of  his  inquiries  and  reflections  :  — 

A  plan  for  an  establishment  of  this  nature,  involves  a  great 
variety  of  considerations,  intricate,  nice,  and  important.  The 
general  state  of  debtor  and  creditor ;  all  the  relations  and  con- 
sequences of  price  ;  the  essential  interests  of  trade  and  indus- 
try ;  the  value  of  all  property ;  the  whole  income,  both  of  the 
State  and  of  individuals,  are  liable  to  be  sensibly  influenced, 
beneficially  or  otherwise,  by  the  judicious  or  injudicious  regu- 
lation of  this  interesting  object. 

It  is  one,  likewise,  not  more  necessary  than  difficult  to  be 
rightly  adjusted;  one  which  has  frequently  occupied  the  reflec- 
tions and  researches  of  politicians,  without  having  harmonized 
their  opinions  on  some  of  the  most  important  of  the  principles 
which  enter  into  its  discussion.  Accordingly,  different  systems 
continue  to  be  advocated,  and  the  systems  of  different  nations, 
after  much  investigation,  continue  to  differ  from  each  other. 

But  if  a  right  adjustment  of  the  matter  be  truly  of  such 
nicety  and  difficulty,  a  question  naturally  arises,  whether  it  may 
not  be  most  advisable  to  leave  things  in  this  respect,  in  the 
state  in  which  they  are?  Why,  might  it  be  asked,  since  they 
have  so  long  proceeded  in  a  train  which  has  caused  no  general 
sensation  of  inconvenience,  should  alterations  be  attempted, 
the  precise  effect  of  which  cannot  with  certainty  be  calculated  ? 

The  answer  to  this  question  is  not  perplexing.  The  immense 
disorder  which  actually  reigns  in  so  delicate  and  important  a 
concern,  and  the  still  greater  disorder  which  is  every  moment 
possible,  call  loudly  for  a  reform.    The  dollar  originally  con- 


592  CONTEST  FOR  SOUND  MONEY 

templated  in  the  money  transactions  of  this  country,  by  suc- 
cessive diminutions  of  its  weight  and  fineness,  has  sustained  a 
depreciation  of  five  per  cent. ;  and  yet  the  new  dollar  has  a 
currency,  in  all  payments  in  place  of  the  old,  with  scarcely  any 
attention  to  the  difference  between  them.  The  operation  of 
this  in  depreciating  the  value  of  property  depending  upon  past 
contracts,  and  (as  far  as  inattention  to  the  alteration  in  the  . 
coin  may  be  supposed  to  leave  prices  stationary)  of  all  other 
property,  is  apparent.  Nor  can  it  require  argument  to  prove 
that  a  nation  ought  not  to  suffer  the  value  of  the  property  of 
its  citizens  to  fluctuate  with  the  fluctuations  of  a  foreign  mint, 
and  to  change  with  the  changes  in  the  regulations  of  a  foreign 
sovereign.  This,  nevertheless,  is  the  condition  of  one  which, 
having  no  coins  of  its  own,  adopts  with  implicit  confidence  those 
of  other  countries. 

The  unequal  values  allowed,  in  different  parts  of  the  Union, 
to  coins  of  the  same  intrinsic  worth ;  the  defective  species  of 
them  which  embarrass  the  circulation  of  some  of  the  States ; 
and  the  dissimilarity  in  their  several  moneys  of  account,  are 
inconveniences  which,  if  not  to  be  ascribed  to  the  want  of  a 
national  coinage,  will  at  least  be  most  effectually  remedied  by 
the  establishment  of  one  :  a  measure  that  will,  at  the  same 
time,  give  additional  security  against  impositions  by  counterfeit 
as  well  as  by  base  currencies. 

It  was  with  great  reason,  therefore,  that  the  attention  of  Con- 
gress, under  the  late  confederation,  was  repeatedly  drawn  to 
the  establishment  of  a  mint ;  and  it  is  with  equal  reason  that 
the  subject  has  been  resumed,  now  that  the  favorable  change  ■ 
which  has  taken  place  in  the  situation  of  public  affairs  admits 
of  its  being  carried  into  execution. 

But,  though  the  difficulty  of  devising  a  proper  establishment 
ought  not  to  deter  from  undertaking  so  necessary  a  work,  yet 
it  cannot  but  inspire  diffidence  in  one,  whose  duty  it  is  made 
to  propose  a  plan  for  the  purpose,  and  may  perhaps  be  permit- 
ted to  be  relied  upon  as  some  excuse  for  any  errors  which  may 
be  chargeable  upon  it,  or  for  any  deviations  from  sounder  prin- 
ciples which  may  have  been  suggested  by  others,  or  even  in 
part  acted  upon  by  the  former  Government  of  the  United 
States. 

In  order  to  a  right  judgment  of  what  ought  to  be  done,  the 
following  particulars  require  to  be  discussed  : 

ist.  What  ought  to  be  the  nature  of  the  money  unit  of  the 
United  States  ? 

2d.  What  the  proportion  between  gold  and  silver,  if  coins  of 
both  metals  are  to  be  established  ? 


APPENDIX  593 

3d.  What  the  proportion  and  composition  of  alloy  in  each 
kind? 

4th.  Whether  the  expense  of  coinage  shall  be  defrayed  by 
the  Government,  or  out  of  the  material  itself  ? 

5th.  What  shall  be  the  number,  denominations,  sizes,  and 
devices  of  the  coins? 

6th.  Whether  foreign  coins  shall  be  permitted  to  be  current 
or  not ;  if  the  former,  at  what  rate,  and  for  what  period? 

A  prerequisite  to  determining  with  propriety  what  ought  to 
be  the  money  unit  of  the  United  States,  is  to  endeavor  to  form 
as  accurate  an  idea  as  the  nature  of  the  case  will  admit  of  what 
it  actually  is.  The  pound,  though  of  various  value,  is  the  unit 
in  the  money  of  account  of  all  the  States.  But  it  is  not  equally 
easy  to  pronounce  what  is  to  be  considered  as  the  unit  in  the 
coins.  There  being  no  formal  regulation  on  the  point,  (the 
resolutions  of  Congress  of  the  6th  of  July,  1785,  and  8th  of 
August,  1786,  having  never  yet  been  carried  into  operation,) 
it  can  only  be  inferred  from  usage  or  practice.  The  manner  of 
adjusting  foreign  exchanges,  would  seem  to  indicate  the  dollar 
as  best  entitled  to  that  character.  In  these,  the  old  piaster  of 
Spain,  or  old  Seville  piece  of  eight  rials,  of  the  value  of  four 
shillings  and  six-pence  sterling,  is  evidently  contemplated. 
The  computed  par  between  Great  Britain  and  Pennsylvania, 
will  serve  as  an  example.  According  to  that,  one  hundred 
pounds  sterling  is  equal  to  one  hundred  and  sixty-six  pounds 
and  two-thirds  of  a  pound,  Pennsylvania  currency;  which 
corresponds  with  the  proportion  between  4s.  6d.  sterling,  and 
7-y.  6d.  the  current  value  of  the  dollar  in  that  State,  by  invari- 
able usage.  And,  as  far  as  the  information  of  the  Secretary 
goes,  the  same  comparison  holds  in  the  other  States. 

But  this  circumstance  in  favor  of  the  dollar,  loses  much  of  its 
weight  from  two  considerations.  That  species  of  coin  has 
never  had  any  settled  or  standard  value,  according  to  weight 
or  fineness,  but  has  been  permitted  to  circulate  by  tale,  without 
regard  to  either,  very  much  as  a  mere  money  of  convenience, 
while  gold  has  had  a  fixed  price  by  weight,  and  with  an  eye  to 
its  fineness.  This  greater  stability  of  value  of  the  gold  coins, 
is  an  argument  of  force  for  regarding  the  money  unit  as  having 
been  hitherto  virtually  attached  to  gold,  rather  than  to  silver. 

Twenty-four  grains  and  six-eighths  of  a  grain  of  fine  gold, 
have  corresponded  with  the  nominal  value  of  the  dollar  in  the 
several  States,  without  regard  to  the  successive  diminutions  of 
its  intrinsic  worth. 

But,  if  the  dollar  should,  notwithstanding,  be  supposed  to 
have  the  best  title  to  being  considered  as  the  present  unit  in 

2Q 


594  CONTEST  FOR  SOUND  MONEY 

the  coins,  it  would  remain  to  determine  what  kind  of  dollar 
ought  to  be  understood  ;  or,  in  other  words,  what  precise  quan- 
tity of  fine  silver. 

The  old  piaster  of  Spain,  which  appears  to  have  regulated  our 
foreign  exchanges,  weighed  17  dwt.  12  grains,  and  contained  386 
grains  and  15  mites  of  fine  silver.  But  this  piece  has  been  long 
since  out  of  circulation.  The  dollars  now  in  common  currency, 
are  of  recent  date,  and  much  inferior  to  that,  both  in  weight 
and  fineness.  The  average  weight  of  them,  upon  different 
trials,  in  large  masses,  has  been  found  to  be  17  dwt.  8  grains. 
Their  fineness  is  less  precisely  ascertained ;  the  results  of  vari- 
ous assays  made  by  different  persons,  under  the  direction  of  the 
late  Superintendent  of  the  Finances,  and  of  the  Secretary,  being 
as  various  as  the  assays  themselves.  The  difference  between 
their  extremes  is  not  less  than  24  grains  in  a  dollar  of  the  same 
weight  and  age  ;  which  is  too  much  for  any  probable  differences 
in  the  pieces.  It  is  rather  to  be  presumed,  that  a  degree  of  in- 
accuracy has  been  occasioned  by  the  want  of  proper  apparatus, 
and,  in  general,  of  practice.  The  experiment  which  appears  to 
have  the  best  pretensions  to  exactness,  would  make  the  new 
dollar  to  contain  370  grains  and  933  thousandth  parts  of  a  grain 
of  pure  silver. 

According  to  an  authority  on  which  the  Secretary  places  re- 
liance, the  standard  of  Spain  for  its  silver  coin  in  the  year  1761, 
was  261  parts  fine,  and  27  parts  alloy ;  at  which  proportion,  a 
dollar  of  17  dwt.  8  grains,  would  consist  of  377  grains  of  fine 
silver,  and  39  grains  of  alloy.  But  there  is  no  question  'that 
this  standard  has  been  since  altered  considerably  for  the  worse  : 
to  what  precise  point,  is  not  as  well  ascertained  as  could  be 
wished ;  but,  from  a  computation  of  the  value  of  dollars  in  the 
markets  both  of  Amsterdam  and  London,  (a  criterion  which  can- 
not materially  mislead,)  the  new  dollar  appears  to  contain  about 
368  grains  of  fine  silver  and  that  which  immediately  preceded 
it  about  374  grains. 

In  this  state  of  things,  there  is  some  difficulty  in  defining  the 
dollar,  which  is  to  be  understood  as  constituting  the  present 
money  unit,  on  the  supposition  of  its  being  most  applicable 
to  that  species  of  coin.  The  old  Seville  piece  of  386  grains 
and  15  mites  fine,  comports  best  with  the  computations  of  for- 
eign exchanges,  and  with  the  more  ancient  contracts  respecting 
landed  property ;  but  far  the  greater  number  of  contracts  still 
in  operation  concerning  that  kind  of  property,  and  all  those  of 
a  merely  personal  nature,  now  in  force,  must  be  referred  to  a 
dollar  of  a  different  kind.  The  actual  dollar  at  the  time  of  con- 
tracting, is  the  only  one  which  can  be  supposed  to  have  been 


APPENDIX  595 

intended ;  and  it  has  been  seen  that,  as  long  ago  as  the  year 
1 761,  there  had  been  a  material  degradation  of  the  standard. 
And  even  in  regard  to  the  more  ancient  contracts,  no  person 
has  ever  had  any  idea  of  a  scruple  about  receiving  the  dollar 
of  the  day  as  a  full  equivalent  for  the  nominal  sum  which  the 
dollar  originally  imported. 

A  recurrence,  therefore,  to  the  ancient  dollar,  would  be  in 
the  greatest  number  of  cases  an  innovation  in  fact,  and,  in  all, 
an  innovation  in  respect  to  opinion.  The  actual  dollar  in  com- 
mon circulation  has  evidently  a  much  better  claim  to  be  re- 
garded as  the  actual  money  unit. 

The  mean  intrinsic  value  of  the  different  kinds  of  known 
dollars  has  been  intimated  as  affording  the  proper  criterion. 
But,  when  it  is  recollected  that  the  more  ancient  and  more  val- 
uable ones  are  not  now  to  be  met  with  at  all  in  circulation,  and 
that  the  mass  of  those  generally  current  is  composed  of  the 
newest  and  most  inferior  kinds,  it  will  be  perceived  that  even  an 
equation  of  that  nature  would  be  a  considerable  innovation  upon 
the  real  present  state  of  things ;  which  it  will  certainly  be  pru- 
dent to  approach,  as  far  as  may  be  consistent  with  the  perma- 
nent order  designed  to  be  introduced. 

An  additional  reason  for  considering  the  prevailing  dollar  as 
the  standard  of  the  present  money  unit,  rather  than  the  ancient 
one,  is,  that  it  will  not  only  be  conformable  to  the  true  existing 
porportion  between  the  two  metals  in  this  country,  but  will  be 
more  conformable  to  that  which  obtains  in  the  commercial 
world  generally. 

The  difference  established  by  custom  in  the  United  States 
between  coined  gold  and  coined  silver  has  been  stated,  upon 
another  occasion,  to  be  nearly  as  1  to  1 5 .6.  This,  if  truly  the  case, 
would  imply  that  gold  was  extremely  overvalued  in  the  United 
States  ;  for  the  highest  actual  proportion,  in  any  part  of  Europe, 
very  little,  if  at  all,  exceeds  1  to  15  ;  and  the  average  propor- 
tion throughout  Europe  is  probably  not  more  than  about  1  to 
14.8.  But  that  statement  has  proceeded  upon  the  idea  of  the 
ancient  dollar.  One  pennyweight  of  gold  of  twenty-two  carats 
fine,  at  6s.  8d.,  and  the  old  Seville  piece  of  386  grains  and  15 
mites  of  pure  silver,  at  7s.  6d.,  furnish  the  exact  ratio  of  1  to 
15.6262.  But  this  does  not  coincide  with  the  real  difference 
between  the  metals  in  our  market,  or,  which  is  with  us  the  same 
thing,  in  our  currency.  To  determine  this,  the  quantity  of  fine 
silver  in  the  general  mass  of  the  dollars  now  in  circulation  must 
afford  the  rule.  Taking  the  rate  of  the  late  dollar  of  374  grains, 
the  proportion  would  be  as  1  to  15.11.  Taking  the  rate  of  the 
newest  dollar,  the  proportion  would  then  be  as  1  to  14.87.     The 


596  CONTEST  FOR  SOUND  MONEY 

mean  of  the  two  would  give  the  proportion  of  i  to  15,  very 
nearly ;  less  than  the  legal  proportion  in  the  coins  of  Great 
Britain,  which  is  as  1  to  15.2  ;  but  somewhat  more  than  the 
actual  or  market  proportion,  which  is  not  quite  1  to  15. 

The  preceding  view  of  the  subject  does  not  indeed  afford  a 
precise  or  certain  definition  of  the  present  unit  in  the  coins, 
but  it  furnishes  data  which  will  serve  as  guides  in  the  progress 
of  the  investigation.  It  ascertains,  at  least,  that  the  sum  in  the 
money  of  account  of  each  State,  corresponding  with  the  nomi- 
nal value  of  the  dollar  in  such  State,  corresponds  also  with  24 
grains  and  f  of  a  grain  of  fine  gold ;  and  with  something  be- 
tween 368  and  374  grains  of  fine  silver. 

The  next  inquiry  towards  a  right  determination  of  what  ought 
to  be  the  future  money  unit  of  the  United  States,  turns  upon 
these  questions  :  Whether  it  ought  to  be  peculiarly  attached  to 
either  of  the  metals,  in  preference  to  the  other  or  not  ?  and,  if 
to  either,  to  which  of  them  ? 

The  suggestions  and  proceedings  hitherto  have  had  for  their 
object  the  annexing  of  it  emphatically  to  the  silver  dollar.  A 
resolution  of  Congress  of  the  6th  of  July,  1785,  declares  that 
the  money  unit  of  the  United  States  shall  be  a  dollar ;  and  an- 
other resolution  of  the  8th  of  August,  1 786,  fixes  that  dollar  at 
375  grains  and  64  hundredths  of  a  grain  of  fine  silver.  The 
same  resolution,  however,  determines  that  there  shall  also  be 
two  gold  coins  :  one  of  246  grains  and  268  parts  of  a  grain  of 
pure  gold,  equal  to  ten  dollars  ;  and  the  other,  of  half  that 
quantity  of  pure  gold,  equal  to  five  dollars.  And  it  is  not  ex- 
plained whether  either  of  the  two  species  of  coins,  of  gold  or 
silver,  shall  have  any  greater  legality  in  payments  than  the 
other.  Yet  it  would  seem  that  a  preference  in  this  particular  is 
necessary  to  execute  the  idea  of  attaching  the  unit  exclusively 
to  one  kind.  If  each  of  them  be  as  valid  as  the  other,  in  pay- 
ments to  any  amount,  it  is  not  obvious  in  what  effectual  sense 
either  of  them  can  be  deemed  the  money  unit,  rather  than  the 
other. 

If  the  general  declaration,  that  the  dollar  shall  be  the  money 
unit  of  the  United  States,  could  be  understood  to  give  it  a 
superior  legality  in  payments,  the  institution  of  coins  of  gold, 
and  the  declaration  that  each  of  them  shall  be  equal  to  a  cer- 
tain number  of  dollars,  would  appear  to  destroy  that  inference. 
And  the  circumstance  of  making  the  dollar  the  unit  in  the  money 
of  account,  seems  to  be  rather  matter  of  form  than  of  substance. 

Contrary  to  the  ideas  which  have  hitherto  prevailed,  in  the 
suggestions  concerning  a  coinage  for  the  United  States,  though 
not  without  much  hesitation,  arising  from  a  deference  for  those 


APPENDIX  597 

ideas,  the  Secretary  is,  upon  the  whole,  strongly  inclined  to  the 
opinion,  that  a  preference  ought  to  be  given  to  neither  of  the 
metals  for  the  money  unit.  Perhaps,  if  either  were  to  be  pre- 
ferred, it  ought  to  be  gold  rather  than  silver. 

The  reasons  are  these  :  — 

The  inducement  to  such  a  preference  is,  to  render  the  unit  as 
little  variable  as  possible  ;  because  on  this  depends  the  steady 
value  of  all  contracts,  and,  in  a  certain  sense,  of  all  other  prop- 
erty. And  it  is  truly  observed,  that  if  the  unit  belong  indis- 
criminately to  both  the  metals,  it  is  subject  to  all  the  fluctuations 
that  happen  in  the  relative  value  which  they  bear  to  each  other. 
But  the  same  reason  would  lead  to  annexing  it  to  that  particular 
one,  which  is  itself  the  least  liable  to  variation ;  if  there  be,  in 
this  respect,  any  discernible  difference  between  the  two. 

Gold  may,  perhaps,  in  certain  senses,  be  said  to  have  greater 
stability  than  silver;  as,  being  of  superior  value,  less  liberties 
have  been  taken  with  it,  in  the  regulations  of  different  coun- 
tries. Its  standard  has  remained  more  uniform,  and  it  has,  in 
other  respects,  undergone  fewer  changes  ;  as,  being  not  so  much 
an  article  of  merchandise,  owing  to  the  use  made  of  silver  in  the 
trade  with  the  East  Indies  and  China,  it  is  less  likely  to  be  in- 
fluenced by  circumstances  of  commercial  demand.  And  if, 
reasoning  by  analogy,  it  could  be  affirmed,  that  there  is  a  physical 
probability  of  greater  proportional  increase  in  the  quantity  of 
silver  than  in  that  of  gold,  it  would  afford  an  additional  reason 
for  calculating  on  greater  steadiness  in  the  value  of  the  latter. 

As  long  as  gold,  either  from  its  intrinsic  superiority  as  a  metal, 
from  its  greater  rarity,  or  from  the  prejudices  of  mankind,  re- 
tains so  considerable  a  preeminence  in  value  over  silver,  as  it 
has  hitherto  had,  a  natural  consequence  of  this  seems  to  be  that 
its  condition  will  be  more  stationary.  The  revolutions,  there- 
fore, which  may  take  place  in  the  comparative  value  of  gold  and 
silver,  will  be  changes  in  the  state  of  the  latter,  rather  than  in 
that  of  the  former. 

If  there  should  be  an  appearance  of  too  much  abstraction  in 
any  of  these  ideas,  it  may  be  remarked,  that  the  first  and  most 
simple  impressions  do  not  naturally  incline  to  giving  a  prefer- 
ence to  the  inferior  or  least  valuable  of  the  two  metals. 

It  is  sometimes  observed,  that  silver  ought  to  be  encouraged 
rather  than  gold,  as  being  more  conducive  to  the  extension 
of  bank  circulation,  from  the  greater  difficulty  and  inconvenience 
which  its  greater  bulk,  compared  with  its  value,  occasions  in  the 
transportation  of  it.  But  bank  circulation  is  desirable,  rather 
as  an  auxiliary  to,  than  as  a  substitute  for  that  of  the  precious 
metals,  and  ought  to  be  left  to  its  natural  course.     Artificial 


598  CONTEST  FOR  SOUND  MONEY 

expedients  to  extend  it,  by  opposing  obstacles  to  the  other,  are 
at  least  not  recommended  by  any  very  obvious  advantages. 
And,  in  general,  it  is  the  safest  rule  to  regulate  every  particular 
institution  or  object,  according  to  the  principles  which,  in  rela- 
tion to  itself,  appear  the  most  sound.  In  addition  to  this,  it 
may  be  observed,  that  the  inconvenience  of  transporting  either 
of  the  metals,  is  sufficiently  great  to  induce  a  preference  of  bank 
paper,  whenever  it  can  be  made  to  answer  the  purpose  equally 
well. 

But,  upon  the  whole,  it  seems  to  be  most  advisable,  as  has 
been  observed,  not  to  attach  the  unit  exclusively  to  either 
of  the  metals  ;  because  this  cannot  be  done  effectually,  without 
destroying  the  office  and  character  of  one  of  them  as  money, 
and  reducing  it  to  the  situation  of  a  mere  merchandise  ;  which, 
accordingly,  at  different  times,  has  been  proposed  from  different 
and  very  respectable  quarters  ;  but  which  would  probably  be  a 
greater  evil  than  occasional  variations  in  the  unit,  from  the 
fluctuations  in  the  relative  value  of  the  metals ;  especially  if 
care  be  taken  to  regulate  the  proportion  between  them,  with  an 
eye  to  their  average  commercial  value. 

To  annul  the  use  of  either  of  the  metals,  as  money,  is  to 
abridge  the  quantity  of  circulating  medium  ;  and  is  liable  to  all 
the  objections  which  arise  from  a  comparison  of  the  benefits 
of  a  full,  with  the  evils  of  a  scanty  circulation. 

It  is  not  a  satisfactory  answer  to  say,  that  none  but  the  favored 
metal  would  in  this  case  find  its  way  into  the  country,  as  in  that 
all  balances  must  be  paid.  The  practicability  of  this  would,  in 
some  measure,  depend  on  the  abundance  or  scarcity  of  it  in  the 
country  paying.  Where  there  was  but  little,  it  either  would  not 
be  procurable  at  all,  or  it  would  cost  a  premium  to  obtain  it ; 
which,  in  every  case  of  a  competition  with  others,  in  a  branch 
of  trade,  would  constitute  a  deduction  from  the  profits  of  the 
party  receiving.  Perhaps,  too,  the  embarrassments  which  such 
a  circumstance  might  sometimes  create,  in  the  pecuniary  liqui- 
dation of  balances,  might  lead  to  additional  efforts  to  find  a  sub- 
stitute in  commodities,  and  might  so  far  impede  the  introduc- 
tion of  the  metals.  Neither  could  the  exclusion  of  either  of 
them  be  deemed,  in  other  respects,  favorable  to  commerce.  It 
is  often,  in  the  course  of  trade,  as  desirable  to  possess  the  kind 
of  money,  as  the  kind  of  commodities  best  adapted  to  a  foreign 
market. 

It  seems,  however,  most  probable,  that  the  chief,  if  not  the 
sole,  effect  of  such  a  regulation,  would  be  to  diminish  the 
utility  of  one  of  the  metals.  It  could  hardly  prove  an  obstacle 
to  the  introduction  of  that  which  was  excluded  in  the  natural 


append  rx  599 

course  of  trade,  because  it  would  always  command  a  ready  sale 
for  the  purpose  of  exportation  to  foreign  markets.  But  such 
an  effect,  if  the  only  one,  is  not  to  be  regarded  as  a  trivial  in- 
convenience. 

If,  then,  the  unit  ought  not  to  be  attached  exclusively  to 
either  of  the  metals,  the  proportion  which  ought  to  subsist 
between  them,  in  the  coins,  becomes  a  preliminary  inquiry,  in 
order  to  its  proper  adjustment.  This  proportion  appears  to 
be,  in  several  views,  of  no  inconsiderable  moment. 

One  consequence  of  overvaluing  either  metal,  in  respect  to 
the  other,  is  the  banishment  of  that  which  is  undervalued.  If 
two  countries  are  supposed,  in  one  of  which  the  proportion  of 
gold  to  silver  is  as  i  to  16,  in  the  other  as  i  to  15,  gold  being 
worth  more,  silver  less,  in  one  than  in  the  other,  it  is  manifest 
that,  in  their  reciprocal  payments,  each  will  select  that  species 
which  it  values  least,  to  pay  to  the  other  where  it  is  valued 
most.  Besides  this,  the  dealers  in  money  will,  from  the  same 
cause,  often  find  a  profitable  traffic  in  an  exchange  of  the  metals 
between  the  two  countries.  And  hence  it  would  come  to  pass, 
if  other  things  were  equal,  that  the  greatest  part  of  the  gold 
would  be  collected  in  one,  and  the  greatest  part  of  the  silver 
in  the  other.  The  course  of  trade  might  in  some  degree 
counteract  the  tendency  of  the  difference  in  the  legal  propor- 
tions by  the  market  value ;  but  this  is  so  far  and  so  often 
influenced  by  the  legal  rates,  that  it  does  not  prevent  their 
producing  the  effect  which  is  inferred.  Facts,  too,  verify  the 
inference.  In  Spain  and  England,  where  gold  is  rated  higher 
than  in  other  parts  of  Europe,  there  is  a  scarcity  of  silver ; 
while  it  is  found  to  abound  in  France  and  Holland,  where  it  is 
rated  higher  in  proportion  to  gold  than  in  the  neighboring 
nations.  And  it  is  continually  flowing  from  Europe  to  China 
and  the  East  Indies,  owing  to  the  comparative  cheapness  of  it 
in  the  former,  and  dearness  of  it  in  the  latter. 

This  consequence  is  deemed  by  some  not  very  material ;  and 
there  are  even  persons  who,  from  a  fanciful  predilection  to 
gold,  are  willing  to  invite  it,  even  by  a  higher  price.  But 
general  utility  will  best  be  promoted  by  a  due  proportion  of 
both  metals.  If  gold  be  most  convenient  in  large  payments, 
silver  is  best  adapted  to  the  more  minute  and  ordinary  cir- 
culation. 

But  it  is  to  be  suspected  that  there  is  another  consequence, 
more  serious  than  the  one  which  has  been  mentioned.  This  is 
the  diminution  of  the  total  quantity  of  specie  which  a  country 
would  naturally  possess. 

It  is  evident  that  as  often  as  a  country,  which  overrates  either 


600  CONTEST  FOR  SOUND  MONEY 

of  the  metals,  receives  a  payment  in  that  metal,  it  gets  a  less 
actual  quantity  than  it  ought  to  do,  or  than  it  would  do  if  the 
rate  were  a  just  one. 

It  is  also  equally  evident,  that  there  will  be  a  continual  effort 
to  make  payment  to  it  in  that  species  to  which  it  has  annexed 
an  exaggerated  estimation,  wherever  it  is  current  at  a  less 
proportional  value.  And  it  would  seem  to  be  a  very  natural 
effect  of  these  two  causes,  not  only  that  the  mass  of  the  precious 
metals  in  the  country  in  question  would  consist  chiefly  of  that 
kind  to  which  it  had  given  an  extraordinary  value,  but  that  it 
would  be  absolutely  less  than  if  they  had  been  duly  propor- 
tioned to  each  other. 

A  conclusion  of  this  sort,  however,  is  to  be  drawn  with  great 
caution.  In  such  matters,  there  are  always  some  local  and 
many  other  particular  circumstances,  which  qualify  and  vary 
the  operation  of  general  principles,  even  where  they  are  just ; 
and  there  are  endless  combinations,  very  difficult  to  be 
analyzed,  which  often  render  principles,  that  have  the  most 
plausible  pretensions,  unsound  and  delusive. 

There  ought,  for  instance,  according  to  those  which  have 
been  stated  to  have  been  formerly  a  greater  quantity  of  gold 
in  proportion  to  silver  in  the  United  States,  than  there  has 
been ;  because  the  actual  value  of  gold  in  this  country,  com- 
pared with  silver,  was  perhaps  higher  than  in  any  other.  But 
our  situation  in  regard  to  the  West  India  islands,  into  some  of 
which  there  is  a  large  influx  of  silver  directly  from  the  mines 
of  South  America,  occasions  an  extraordinary  supply  of  that 
metal,  and  consequently  a  greater  proportion  of  it  in  our  cir- 
culation than  might  have  been  expected  from  its  relative 
value. 

What  influence  the  proportion  under  consideration  may  have 
upon  the  state  of  prices,  and  how  far  this  may  counteract  its 
tendency  to  increase  or  lessen  the  quantity  of  the  metals,  are 
points  not  easy  to  be  developed  ;  and  yet  they  are  very  neces- 
sary to  an  accurate  judgment  of  the  true  operation  of  the 
thing. 

But  however  impossible  it  may  be  to  pronounce  with  cer- 
tainty, that  the  possession  of  a  less  quantity  of  specie  is  a  con- 
sequence of  overvaluing  either  of  the  metals,  there  is  enough 
of  probability  in  the  considerations  which  seem  to  indicate  it, 
to  form  an  argument  of  weight  against  such  overvaluation. 

A  third  ill  consequence  resulting  from  it  is,  a  greater  and 
more  frequent  disturbance  of  the  state  of  the  money  unit,  by  a 
greater  and  more  frequent  diversity  between  the  legal  and 
market  proportions  of  the  metals.     This  has  not  hitherto  been 


APPENDIX  60 1 

experienced  in  the  United  States,  but  it  has  been  experienced 
elsewhere ;  and  from  its  not  having  been  felt  by  us  hitherto,  it 
does  not  follow  that  this  will  not  be  the  case  hereafter,  when 
our  commerce  shall  have  attained  a  maturity,  which  will  place 
it  under  the  influence  of  more  fixed  principles. 

In  establishing  a  proportion  between  the  metals,  there  seems 
to  be  an  option  of  one  of  two  things  — 

To  approach,  as  nearly  as  it  can  be  ascertained,  the  mean  or 
average  proportion,  in  what  may  be  called  the  commercial 
world ;  or, 

To  retain  that  which  now  exists  in  the  United  States.  As 
far  as  these  happen  to  coincide,  they  will  render  the  course  to 
be  pursued  more  plain  and  more  certain. 

To  ascertain  the  first,  with  precision,  would  require  better 
materials  than  are  possessed,  or  than  could  be  obtained,  without 
an  inconvenient  delay. 

Sir  Isaac  Newton,  in  a  representation  to  the  Treasury  of 
Great  Britain,  in  the  year  171 7,  after  stating  the  particular 
proportions  in  the  different  countries  of  Europe,  concludes 
thus  :  —  "By  the  course  of  trade  and  exchange  between  nation 
and  nation,  in  all  Europe,  fine  gold  is  to  fine  silver  as  14^,  or 
15  to  1." 

But  however  accurate  and  decisive  this  authority  may  be 
deemed,  in  relation  to  the  period  to  which  it  applies,  it  cannot 
be  taken,  at  the  distance  of  more  than  seventy  years,  as  a  rule 
for  determining  the  existing  proportion.  Alterations  have  been 
since  made  in  the  regulations  of  their  coins  by  several  nations  ; 
which,  as  well  as  the  course  of  trade,  have  an  influence  upon 
the  market  values.  Nevertheless,  there  is  reason  to  believe, 
that  the  state  of  the  matter,  as  represented  by  Sir  Isaac  New- 
ton, is  not  very  remote  from  its  actual  state. 

In  Holland,  the  greatest  money  market  of  Europe,  gold  was 
to  silver,  in  December,  1789,  as  1  to  14.88;  and  in  that  of 
London  it  has  been,  for  some  time  past,  but  little  different, 
approaching  perhaps  something  nearer  1  to  15. 

It  has  been  seen  that  the  existing  proportion  between  the 
two  metals  in  this  country  is  about  as  1  to  15. 

It  is  fortunate,  in  this  respect,  that  the  innovations  of  the 
Spanish  mint  have  imperceptibly  introduced  a  proportion  so 
analogous  as  this  is  to  that  which  prevails  among  the  principal 
commercial  nations,  as  it  greatly  facilitates  a  proper  regulation 
of  the  matter. 

This  proportion  of  1  to  15  is  recommended  by  the  particular 
situation  of  our  trade,  as  being  very  nearly  that  which  obtains 
in  the  market  of  Great  Britain  ;  to  which  nation  our  specie  is 


602  CONTEST  FOR  SOUND  MONEY 

principally  exported.  A  lower  rate  for  either  of  the  metals,  in 
our  market,  than  in  hers,  might  not  only  afford  a  motive  the 
more,  in  certain  cases,  to  remit  in  specie  rather  than  in  com- 
modities; but  it  might,  in  some  others,  cause  us  to  pay  a 
greater  quantity  of  it  for  a  given  sum  than  we  should  otherwise 
do.  If  the  effect  should  rather  be  to  occasion  a  premium  to 
be  given  for  the  metal  which  was  underrated,  this  would  obviate 
those  disadvantages ;  but  it  would  involve  another,  a  customary 
difference  between  the  market  and  legal  proportions,  which 
would  amount  to  a  species  of  disorder  in  the  national  coinage. 

Looking  forward  to  the  payments  of  interest  hereafter  to  be 
made  to  Holland,  the  same  proportion  does  not  appear  ineli- 
gible. The  present  legal  proportion  in  the  coins  of  Holland  is 
stated  at  i  to  i4TV  That  of  the  market  varies  somewhat  at 
different  times,  but  seldom  very  widely  from  this  point. 

There  can  hardly  be  a  better  rule  in  any  country,  for  the 
legal,  than  the  market  proportion,  if  this  can  be  supposed  to 
have  been  produced  by  the  free  and  steady  course  of  commer- 
cial principles.  The  presumption  in  such  case  is,  that  each 
metal  finds  its  true  level,  according  to  its  intrinsic  utility,  in  the 
general  system  of  money  operations. 

But  it  must  be  admitted  that  this  argument  in  favor  of  con- 
tinuing the  existing  proportion  is  not  applicable  to  the  state  of 
the  coins  with  us.  There  have  been  too  many  artificial  and 
heterogeneous  ingredients  —  too  much  want  <of  order  in  the 
pecuniary  transactions  of  this  country  —  to  authorize  the  at- 
tributing the  effects  which  have  appeared  to  the  regular  opera- 
tions of  commerce.  A  proof  of  this  is  to  be  drawn  from  the 
alterations  which  have  happened  in  the  proportion  between 
the  metals  merely  by  the  successive  degradations  of  the  dollar, 
in  consequence  of  the  mutability  of  a  foreign  mint.  The  value 
of  gold  to  silver  appears  to  have  declined,  wholly  from  this 
cause,  from  15^  to  about  15  to  1 ;  yet,  as  this  last  proportion, 
however  produced,  coincides  so  nearly  with  what  may  be 
deemed  the  commercial  average,  it  may  be  supposed  to  furnish 
as  good  a  rule  as  can  be  pursued. 

The  only  question  seems  to  be,  whether  the  value  of  gold 
ought  not  to  be  a  little  lowered,  to  bring  it  to  a  more  exact 
level  with  the  two  markets  which  have  been  mentioned ;  but, 
as  the  ratio  of  1  to  15  is  so  nearly  conformable  to  the  state  of 
those  markets,  and  best  agrees  with  that  of  our  own,  it  will 
probably  be  found  the  most  eligible.  If  the  market  of  Spain 
continues  to  give  a  higher  value  to  gold  (as  it  has  done  in  time 
past)  than  that  which  is  recommended,  there  may  be  some 
advantage  in  a  middle  station. 


APPENDIX  603 

A  further  preliminary  to  the  adjustment  of  the  future  money 
unit  is,  to  determine  what  shall  be  the  proportion  and  compo- 
sition of  alloy  in  each  species  of  the  coins. 

The  first,  by  the  resolution  of  the  8th  of  August,  1786,  before 
referred  to,  is  regulated  at  one-twelfth,  or  in  other  words,  at  1 
part  alloy  to  1 1  parts  fine,  whether  gold  or  silver ;  which  appears 
to  be  a  convenient  rule  ;  unless  there  should  be  some  collateral 
consideration  which  may  dictate  a  departure  from  it.  Its  cor- 
respondency, in  regard  to  both  metals,  is  a  recommendation  of 
it,  because  a  difference  could  answer  no  purpose  of  pecuniary 
or  commercial  utility,  and  uniformity  is  favorable  to  order. 

This  ratio,  as  it  regards  gold,  coincides  with  the  proportion, 
real  or  professed,  in  the  coins  of  Portugal,  England,  France  and 
Spain.  In  those  of  the  two  former,  it  is  real ;  in  those  of  the 
two  latter,  there  is  a  deduction  for  what  is  called  remedy  of 
weight  and  alloy,  which  is  in  the  nature  of  an  allowance  to  the 
master  of  the  mint  for  errors  and  imperfections  in  the  process ; 
rendering  the  coin  either  lighter  or  baser  than  it  ought  to  be. 
The  same  thing  is  known  in  the  theory  of  the  English  mint, 
where  \  of  a  carat  is  allowed.  But  the  difference  seems  to  be, 
that  there,  it  is  merely  an  occasional  indemnity  within  a  cer- 
tain limit,  for  real  and  unavoidable  errors  and  imperfections ; 
whereas,  in  the  practice  of  the  mints  of  France  and  Spain,  it 
appears  to  amount  to  a  stated  and  regular  deviation  from  the 
nominal  standard.  Accordingly,  the  real  standards  of  France  and 
Spain  are  something  worse  than  22  carats,  or  n  parts  in  12  fine. 

The  principal  gold  coins  in  Germany,  Holland,  Sweden, 
Denmark,  Poland,  and  Italy,  are  finer  than  those  of  England 
and  Portugal,  in  different  degrees,  from  1  carat  and  \  to  1  carat 
and  \,  which  last  is  within  \  of  a  carat  of  pure  gold. 

There  are  similar  diversities  in  the  standards  of  the  silver 
coins  of  the  different  countries  of  Europe.  That  of  Great 
Britain  is  222  parts  fine,  to  18  alloy ;  those  of  the  other  Euro- 
pean nations  vary  from  that  of  Great  Britain  as  widely  as  from 
about  17  of  the  same  parts  better,  to  75  worse. 

The  principal  reasons  assigned  for  the  use  of  alloy,  are  the 
saving  of  expense  in  the  refining  of  the  metals,  (which  in 
their  natural  state  are  usually  mixed  with  a  portion  of  the 
coarser  kinds,)  and  the  rendering  of  them  harder  as  a  security 
against  too  great  waste  by  friction  or  wearing.  The  first  reason, 
drawn  from  the  original  composition  of  the  metals,  is  strength- 
ened at  present  by  the  practice  of  alloying  their  coins,  which 
has  obtained  among  so  many  nations.  The  reality  of  the  effect 
to  which  the  last  reason  is  applicable,  has  been  denied,  and 
experience  has  been  appealed  to  as  proving  that  the  more 


604  CONTEST  FOR  SOUND  MONEY 

alloyed  coins  wear  faster  than  the  purer.  The  true  state  of  this 
matter  may  be  worthy  of  future  investigation,  though  first  ap- 
pearances are  in  favor  of  alloy.  In  the  mean  time,  the  saving 
of  trouble  and  expense  are  sufficient  inducements  to  following 
those  examples  which  suppose  its  expediency.  And  the  same 
considerations  lead  to  taking  as  our  models  those  nations  with 
whom  we  have  most  intercourse,  and  whose  coins  are  most 
prevalent  in  our  circulation.  These  are  Spain,  Portugal,  Eng- 
land, and  France.  The  relation  which  the  proposed  proportion 
bears  to  their  gold  coins,  has  been  explained.  In  respect  to 
their  silver  coins,  it  will  not  be  very  remote  from  the  mean  of 
their  several  standards. 

The  component  ingredients  of  the  alloy  in  each  metal,  will 
also  require  to  be  regulated.  In  silver,  copper  is  the  only  kind 
in  use,  and  it  is  doubtless  the  only  proper  one.  In  gold,  there 
is  a  mixture  of  silver  and  copper ;  in  the  English  coins  consist- 
ing of  equal  parts,  in  the  coins  of  some  other  countries  varying 
from  \  to  |  silver. 

The  reason  of  this  union  of  silver  with  copper  is  this  :  The 
silver  counteracts  the  tendency  of  the  copper  to  injure  the  color 
or  beauty  of  the  coin,  by  giving  it  too  much  redness,  or  rather 
a  coppery  hue,  which  a  small  quantity  will  produce ;  and  the 
copper  prevents  the  too  great  whiteness  which  silver  alone 
would  confer.  It  is  apprehended  that  there  are  considerations 
which  may  render  it  prudent  to  establish,  by  law,  that  the  pro- 
portion of  silver  to  copper  in  the  gold  coins  of  the  United 
States  shall  not  be  more  than  \,  nor  less  than  i ;  vesting  a  dis- 
cretion in  some  proper  place  to  regulate  the  matter  within  those 
limits,  as  experience  in  the  execution  may  recommend. 

A  third  point  remains  to  be  discussed,  as  a  prerequisite  to 
the  determination  of  the  money  unit,  which  is,  whether  the 
expense  of  coining  shall  be  defrayed  by  the  public,  or  out  of  the 
material  itself;  or,  as  it  is  sometimes  stated,  whether  coinage  shall 
be  free, or  shall  be  subject  to  a  duty  or  imposition?  This  forms 
perhaps,  one  of  the  nicest  questions  in  the  doctrine  of  money. 

The  practice  of  different  nations  is  dissimilar  in  this  particular. 
In  England,  coinage  is  said  to  be  entirely  free ;  the  mint  price 
of  the  metals  in  bullion  being  the  same  with  the  value  of  them 
in  coin.  In  France,  there  is  a  duty,  which  has  been,  if  it  is  not 
now,  eight  per  cent.  In  Holland,  there  is  a  difference  between 
the  mint  price  and  the  value  in  the  coins,  which  has  been  com- 
puted at  .96  or  something  less  than  one  per  cent,  upon  gold  ; 
at  1.48,  or  something  less  than  one  and  a  half  per  cent,  upon 
silver.  The  resolution  of  the  8th  of  August,  1 786,  proceeds  upon 
the  idea  of  a  deduction  of  a  half  per  cent,  from  gold,  and  of 


APPENDIX  605 

two  per  cent,  from  silver,  as  an  indemnification  for  the  expense  of 
coining.  This  is  inferred  from  a  report  of  the  late  board  of  treas- 
ury, upon  which  that  resolution  appears  to  have  been  founded. 

Upon  the  supposition  that  the  expense  of  coinage  ought  to  be 
defrayed  out  of  the  metals,  there  are  two  ways  in  which  it  may 
be  effected  :  one,  by  a  reduction  of  the  quantity  of  fine  gold  and 
silver  in  the  coins ;  the  other,  by  establishing  a  difference  be- 
tween the  value  of  those  metals  in  the  coins,  and  the  mint  price 
of  them  in  bullion. 

The  first  method  appears  to  the  Secretary  inadmissible.  He 
is  unable  to  distinguish  an  operation  of  this  sort  from  that  of 
raising  the  denomination  of  the  coin ;  a  measure  which  has 
been  disapproved  by  the  wisest  men  of  the  nations  in  which  it 
has  been  practised,  and  condemned  by  the  rest  of  the  world. 
To  declare  that  a  less  weight  of  gold  or  silver  shall  pass  for  the 
same  sum,  which  before  represented  a  greater  weight;  or  to 
ordain  that  the  same  weight  shall  pass  for  a  greater  sum,  are 
things  substantially  of  one  nature.  The  consequence  of  either 
of  them,  if  the  change  can  be  realized,  is  to  degrade  the  money 
unit;  obliging  creditors  to  receive  less  than  their  just  dues,  and 
depreciating  property  of  every  kind ;  for  it  is  manifest  that 
every  thing  would,  in  this  case,  be  represented  by  a  less  quantity 
of  gold  and  silver  than  before. 

It  is  sometimes  observed,  on  this  head,  that  though  any 
article  of  property  might,  in  fact,  be  represented  by  a  less 
actual  quantity  of  pure  metal,  it  would  nevertheless  be  repre- 
sented by  something  of  the  same  intrinsic  value.  Every  fabric, 
it  is  remarked,  is  worth  intrinsically  the  price  of  the  raw  ma- 
terial and  the  expense  of  fabrication  ;  a  truth  not  less  appli- 
cable to  a  piece  of  coin  than  to  a  yard  of  cloth. 

This  position,  well  founded  in  itself,  is  here  misapplied.  It 
supposes  that  the  coins  now  in  circulation  are  to  be  considered 
as  bullion,  or,  in  other  words,  as  a  raw  material ;  but  the  fact  is, 
that  the  adoption  of  them  as  money,  has  caused  them  to  be- 
come the  fabric;  it  has  invested  them  with  the  character  and 
office  of  coins,  and  has  given  them  a  sanction  and  efficacy, 
equivalent  to  that  of  the  stamp  of  the  sovereign.  The  prices  of  all 
our  commodities,  at  home  and  abroad,  and  of  all  foreign  com- 
modities in  our  markets,  have  found  their  level  in  conformity 
to  this  principle.  The  foreign  coins  may  be  divested  of  the 
privilege  they  have  hitherto  been  permitted  to  enjoy,  and  may 
of  course  be  left  to  find  their  value  in  the  market  as  a  raw  ma- 
terial. But  the  quantity  of  gold  and  silver  in  the  national  coins, 
corresponding  with  a  given  sum,  cannot  be  made  less  than  here- 
tofore, without  disturbing  the  balance  of  intrinsic  value,  and 


606  CONTEST  FOR  SOUND  MONEY 

making  every  acre  of  land,  as  well  as  every  bushel  of  wheat,  of 
less  actual  worth  than  in  time  past.  If  the  United  States  were 
isolated,  and  cut  off  from  all  intercourse  with  the  rest  of  man- 
kind, this  reasoning  would  not  be  equally  conclusive:  But  it 
appears  decisive,  when  considered  with  a  view  to  the  relations 
which  commerce  has  created  between  us  and  other  countries. 

It  is,  however,  not  improbable,  that  the  effect  meditated 
would  be  defeated  by  a  rise  of  prices  proportioned  to  the 
diminution  of  the  intrinsic  value  of  the  coins.  This  might  be 
looked  for  in  every  enlightened  commercial  country ;  but  per- 
haps in  none  with  greater  certainty  than  in  this,  because  in 
none  are  men  less  liable  to  be  the  dupes  of  sounds  j  in  none 
has  authority  so  little  resource  for  substituting  names  for 
things. 

A  general  revolution  in  prices,  though  only  nominally,  and  in 
appearance,  could  not  fail  to  distract  the  ideas  of  the  commu- 
nity ;  and  would  be  apt  to  breed  discontents  as  well  among 
those  who  live  on  the  income  of  their  money,  as  among  the 
poorer  classes  of  the  people,  to  whom  the  necessaries  of  life 
would  seem  to  have  become  dearer.  In  the  confusion  of  such 
a  state  of  things,  ideas  of  value  would  not  improbably  adhere 
to  the  old  coins,  which,  from  that  circumstance,  instead  of 
feeling  the  effect  of  the  loss  of  their  privilege  as  money,  would 
perhaps  bear  a  price  in  the  market  relatively  to  the  new  ones,  in 
exact  proportion  to  weight.  The  frequency  of  the  demand  for 
the  metals  to  pay  foreign  balances,  would  contribute  to  this  effect. 

Among  the  evils  attendant  on  such  an  operation,  are  these  : 
creditors,  both  of  the  public  and  of  individuals,  would  lose  a 
part  of  their  property ;  public  and  private  credit  would  receive 
a  wound ;  the  effective  revenues  of  the  government  would  be 
diminished.  There  is  scarcely  any  point  in  the  economy  of 
national  affairs,  of  greater  moment  than  the  uniform  preserva- 
tion of  the  intrinsic  value  of  the  money  unit.  On  this  the 
security  and  steady  value  of  property  essentially  depend. 

The  second  method,  therefore,  of  defraying  the  expense  of 
the  coinage  out  of  the  metals,  is  greatly  to  be  preferred  to  the 
other.  This  is  to  let  the  same  sum  of  money  continue  to  repre- 
sent in  the  new  coins  exactly  the  same  quantity  of  gold  and 
silver  as  it  does  in  those  now  current ;  to  allow  at  the  mint 
such  a  price  only  for  those  metals  as  will  admit  of  profit  just 
sufficient  to  satisfy  the  expense  of  coinage  ;  to  abolish  the  legal 
currency  of  the  foreign  coins,  both  in  public  and  private  pay- 
ments ;  and  of  course  to  leave  the  superior  utility  of  the 
national  coins  for  domestic  purposes,  to  operate  the  difference 
of  market  value,  which  is  necessary  to  induce  the  bringing  of 


APPENDIX  607 

bullion  to  the  mint.  In  this  case,  all  property  and  labor  will 
still  be  represented  by  the  same  quantity  of  gold  and  silver  as 
formerly ;  and  the  only  change  which  will  be  wrought,  will  con- 
sist in  annexing  the  office  of  money  exclusively  to  the  national 
coins ;  consequently,  withdrawing  it  from  those  of  foreign 
countries,  and  suffering  them  to  become,  as  they  ought  to  be, 
mere  articles  of  merchandise. 

The  arguments  in  favor  of  a  regulation  of  this  kind  are  : 
First.  That  the  want  of  it  is  a  cause  of  extra  expense :  there 
being  then  no  motive  of  individual  interest  to  distinguish 
between  the  national  coins  and  bullion,  they  are,  it  is  alleged, 
indiscriminately  melted  down  for  domestic  manufactures,  and 
exported  for  the  purposes  of  foreign  trade ;  and  it  is  added, 
that  when  the  coins  become  light  by  wearing,  the  same  quan- 
tity of  fine  gold  or  silver  bears  a  higher  price  in  bullion  than 
in  the  coins ;  in  which  state  of  things,  the  melting  down  of  the 
coins  to  be  sold  as  bullion  is  attended  with  profit;  and  from 
both  causes,  the  expense  of  the  mint,  or,  in  other  words,  the 
expense  of  maintaining  the  specie  capital  of  the  nation,  is 
materially  augmented. 

Secondly.  That  the  existence  of  such  a  regulation  promotes 
a  favorable  course  of  exchange,  and  benefits  trade ;  not  only 
by  that  circumstance,  but  by  obliging  foreigners,  in  certain 
cases,  to  pay  dearer  for  domestic  commodities,  and  to  sell  their 
own  cheaper. 

As  far  as  relates  to  the  tendency  of  a  free  coinage  to  produce 
an  increase  of  expense  in  different  ways  that  have  been  stated, 
the  argument  must  be  allowed  to  have  foundation,  both  in  rea- 
son and  in  experience.  It  describes  what  has  been  exemplified 
in  Great  Britain. 

The  effect  of  giving  an  artificial  value  to  bullion,  is  not  at 
first  sight  obvious ;  but  it  actually  happened  at  the  period 
immediately  preceding  the  late  reformation  in  the  gold  coin  of 
the  country  just  named.  A  pound  troy  in  gold  bullion,  of 
standard  fineness,  was  then  from  \qs.  6d.  to  25^.  sterling  dearer 
than  an  equal  weight  of  guineas,  as  delivered  at  the  mint. 
The  phenomenon  is  thus  accounted  for  —  the  old  guineas  were 
more  than  two  per  cent,  lighter  than  their  standard  weight. 
This  weight,  therefore,  in  bullion,  was  truly  worth  two  per  cent, 
more  than  those  guineas.  It  consequently  had,  in  respect  to 
them,  a  correspondent  rise  in  the  market. 

And  as  guineas  were  then  current  by  tale,  the  new  ones,  as 
they  issued  from  the  mint,  were  confounded  in  circulation 
with  the  old  ones ;  and,  by  the  association,  were  depreciated 
below  their  intrinsic  value,  in   comparison   with   bullion.     It 


60S  CONTEST  FOR  SOUND  MONEY 

became,  of  course,  a  profitable  traffic  to  sell  bullion  for  coin, 
to  select  the  light  pieces,  and  re-issue  them  in  currency,  and 
to  melt  down  the  heavy  ones,  and  sell  them  again  as  bullion. 
This  practice,  besides  other  inconveniences,  cost  the  Govern- 
ment large  sums  in  the  renewal  of  the  coins. 

But  the  remainder  of  the  argument  stands  upon  ground  far 
more  questionable.  It  depends  upon  very  numerous  and  very 
complex  combinations,  in  which  there  is  infinite  latitude  for 
fallacy  and  error. 

The  most  plausible  part  of  it  is  that  which  relates  to  the 
course  of  exchange.  Experience  in  France  has  shown  that 
the  market  price  of  bullion  has  been  influenced  by  the  mint 
difference  between  that  and  coin  —  sometimes  to  the  full 
extent  of  the  difference;  and  it  would  seem  to  be  a  clear 
inference,  that  whenever  that  difference  materially  exceeded 
the  charges  of  remitting  bullion  from  the  country  where  it 
existed,  to  another  in  which  coinage  was  free,  exchange  would 
be  in  favor  of  the  former. 

If,  for  instance,  the  balance  of  trade  between  France  and 
England  were  at  any  time  equal,  their  merchants  would  natu- 
rally have  reciprocal  payments  to  make  to  an  equal  amount, 
which,  as  usual,  would  be  liquidated  by  means  of  bills  of  ex- 
change. If,  in  this  situation,  the  difference  between  coin  and 
bullion  should  be  in  the  market,  as  at  the  mint  of  France,  eight 
per  cent. ;  if,  also,  the  charges  of  transporting  money  from 
France  to  England  should  not  be  above  two  per  cent. ;  and  if 
exchange  should  be  at  par,  it  is  evident  that  a  profit  of  six  per 
cent,  might  be  made,  by  sending  bullion  from  France  to  Eng- 
land, and  drawing  bills  for  the  amount.  One  hundred  louis 
d'ors  in  coin,  would  purchase  the  weight  of  one  hundred  and 
eight  in  bullion  ;  one  hundred  of  which,  remitted  to  England, 
would  suffice  to  pay  a  debt  of  an  equal  amount ;  and  two  being 
paid  for  the  charges  of  insurance  and  transportation  there  would 
remain  six  for  the  benefit  of  the  person  who  should  manage  the 
negotiation.  But  as  so  large  a  profit  could  not  fail  to  produce 
competition,  the  bills,  in  consequence  of  this,  would  decrease  in 
price,  till  the  profit  was  reduced  to  the  minimum  of  an  adequate 
recompense  for  the  trouble  and  risk.  And,  as  the  amount  of  one 
hundred  louis  d'ors  in  England,  might  be  afforded  for  ninety-six 
in  France,  with  a  profit  of  more  than  one  and  a  half  per  cent., 
bills  upon  England,  might  fall  in  France  to  four  per  cent,  below 
par ;  one  per  cent,  being  a  sufficient  profit  to  the  exchanger  or 
broker  for  the  management  of  the  business. 

But  it  is  admitted  that  this  advantage  is  lost,  when  the  balance 
of  trade  is  against  the  nation  which  imposes  the  duty  in  question  ; 


APPENDIX  609 

because,  by  increasing  the  demand  for  bullion,  it  brings  this  to 
a  par  with  the  coins ;  and  it  is  to  be  suspected,  that  where  com- 
mercial principles  have  their  free  scope,  and  are  well  understood, 
the  market  difference  between  the  metals  in  coin  and  bullion, 
will  seldom  approximate  to  that  of  the  mint,  if  the  latter  be  con- 
siderable. It  must  be  not  a  little  difficult  to  keep  the  money 
of  the  world,  which  can  be  employed  to  an  equal  purpose  in  the 
commerce  of  the  world,  in  a  state  of  degradation,  in  comparison 
with  the  money  of  a  particular  country. 

This  alone  would  seem  sufficient  to  prevent  it :  whenever  the 
price  of  coin  to  bullion,  in  the  market,  materially  exceeded  the 
par  of  the  metals,  it  would  become  an  object  to  send  the  bullion 
abroad,  if  not  to  pay  a  foreign  balance,  to  be  invested  in  some 
other  way  in  foreign  countries,  where  it  bore  a  superior  value ; 
an  operation  by  which  immense  fortunes  might  be  amassed,  if 
it  were  not  that  the  exportation  of  the  bullion  would  of  itself 
restore  the  intrinsic  par.  But,  as  it  would  naturally  have  this 
effect,  the  advantage  supposed  would  contain  in  itself  the  prin- 
ciple of  its  own  destruction.  As  long,  however,  as  the  exporta- 
tion of  bullion  could  be  made  with  profit,  which  is  as  long  as 
exchange  could  remain  below  par,  there  would  be  a  drain  of 
the  gold  and  silver  of  the  country. 

If  anything  can  maintain,  for  a  length  of  time,  a  material  differ- 
ence between  the  value  of  the  metals  in  coin  and  in  bullion,  it 
must  be  a  constant  and  considerable  balance  of  trade  in  favor 
of  the  country  in  which  it  is  maintained.  In  one  situated  like 
the  United  States,  it  would  in  all  probability  be  a  hopeless 
attempt.  The  frequent  demand  for  gold  and  silver,  to  pay  bal- 
ances to  foreigners,  would  tend  powerfully  to  preserve  the  equi- 
librium of  intrinsic  value. 

The  prospect  is,  that  it  would  occasion  foreign  coins  to  cir- 
culate by  common  consent,  nearly  at  par  with  the  national. 

To  say,  that  as  far  as  the  effect  of  lowering  exchange  is  pro- 
duced, though  it  be  only  occasional  and  momentary,  there  is  a 
benefit  the  more  thrown  into  the  scale  of  public  prosperity,  is 
not  satisfactory.  It  has  been  seen,  that  it  may  be  productive 
of  one  evil,  the  investment  of  a  part  of  the  national  capital  in 
foreign  countries  ;  which  can  hardly  be  beneficial  but  in  a  situa- 
tion like  that  of  the  United  Netherlands,  where  an  immense 
capital,  and  a  decrease  of  internal  demand,  render  it  necessary 
to  find  employment  for  money  in.  the  wants  of  other  nations ; 
and,  perhaps  on  a  close  examination,  other  evils  may  be 
descried. 

One  allied  to  that  which  has  been  mentioned,  is  this  —  taking 
France,  for  the  sake  of  more  concise  illustration,  as  the  scene. 


6 10  CONTEST  FOR  SOUND  MONEY 

Whenever  it  happens  that  French  louis-d'ors  are  sent  abroad, 
from  whatever  cause,  if  there  be  a  considerable  difference  be- 
tween coin  and  bullion  in  the  market  of  France,  it  will  consti- 
tute an  advantageous  traffic  to  send  back  these  louis-d'ors,  and 
bring  away  bullion  in  lieu  of  them ;  upon  all  which  exchanges, 
France  must  sustain  an  actual  loss  of  a  part  of  its  gold  and  silver. 

Again :  such  a  difference  between  coin  and  bullion  may  tend 
to  counteract  a  favorable  balance  of  trade.  Whenever  a  foreign 
merchant  is  the  carrier  of  his  own  commodities  to  France  for 
sale,  he  has  a  strong  inducement  to  bring  back  specie,  instead 
of  French  commodities ;  because  a  return  in  the  latter  may 
afford  no  profit,  may  even  be  attended  with  loss  ;  in  the  former, 
it  will  afford  a  certain  profit.  The  same  principle  must  be  sup- 
posed to  operate  in  the  general  course  of  remittances  from 
France  to  other  countries.  The  principal  question  with  a  mer- 
chant naturally  is,  in  what  manner  can  I  realize  a  given  sum, 
with  most  advantage,  where  I  wish  to  place  it  ?  And,  in  cases 
in  which  other  commodities  are  not  likely  to  produce  equal 
profit  with  bullion,  it  may  be  expected  that  this  will  be  pre- 
ferred ;  to  which,  the  greater  certainty  attending  the  operation 
must  be  an  additional  incitement.  There  can  hardly  be  im- 
agined a  circumstance  less  friendly  to  trade,  than  the  existence 
of  an  extra  inducement  arising  from  the  possibility  of  a  profit- 
able speculation  upon  the  articles  themselves,  to  export  from  a 
country  its  gold  and  silver,  rather  than  the  products  of  its  land 
and  labor. 

The  other  advantages  supposed,  of  obliging  foreigners  to  pay 
dearer  for  domestic  commodities,  and  to  sell  their  own  cheaper, 
are  applied  to  a  situation  which  includes  a  favorable  balance  of 
trade.  It  is  understood  in  this  sense  :  the  prices  of  domestic 
commodities,  (such,  at  least,  as  are  peculiar  to  the  country,) 
remain  attached  to  the  denominations  of  the  coins.  When  a 
favorable  balance  of  trade  realizes  in  the  market  the  mint  differ- 
ence between  coin  and  bullion,  foreigners,  who  must  pay  in  the 
latter,  are  obliged  to  give  more  of  it  for  such  commodities  than 
they  otherwise  would  do.  Again :  the  bullion,  which  is  now 
obtained  at  a  cheaper  rate  in  the  home  market,  will  procure  the 
same  quantity  of  goods  in  the  foreign  market  as  before,  which 
is  said  to  render  foreign  commodities  cheaper.  In  this  reason- 
ing, much  fallacy  is  to  be  suspected.  If  it  be  true  that  foreigners 
pay  more  for  domestic  commodities,  it  must  be  equally  true  that 
they  get  more  for  their  own  when  they  bring  them  themselves 
to  market.  If  peculiar,  or  other  domestic  commodities  adhere 
to  the  denominations  of  the  coins,  no  reason  occurs  why  foreign 
commodities  of  a  like  character  should  not  do  the  same  thing ; 


APPENDIX  6ll 

and  in  this  case,  the  foreigner,  though  he  receive  only  the  same 
value  in  coin  for  his  merchandise  as  formerly,  can  convert  it 
into  a  greater  quantity  of  bullion.  Whence  the  nation  is  liable 
to  lose  more  of  its  gold  and  silver  than  if  their  intrinsic  value  in 
relation  to  the  coins  were  preserved.  And  whether  the  gain  or 
the  loss  will,  on  the  whole,  preponderate,  would  appear  to  depend 
on  the  comparative  proportion  of  active  commerce  of  the  one 
country  with  the  other. 

It  is  evident,  also,  that  the  nation  must  pay  as  much  gold 
and  silver  as  before,  for  the  commodities  which  it  procures 
abroad;  and  whether  it  obtains  this  gold  and  silver  cheaper,  or 
not,  turns  upon  the  solution  of  the  question  just  intimated, 
respecting  the  relative  proportion  of  active  commerce  between 
the  two  countries. 

Besides  these  considerations,  it  is  admitted  in  the  reasoning, 
that  the  advantages  supposed,  which  depend  on  a  favorable 
balance  of  trade,  have  a  tendency  to  affect  that  balance  dis- 
advantageous!^ Foreigners,  it  is  allowed,  will  in  this  case 
seek  some  other  vent  for  their  commodities,  and  some  other 
market  where  they  can  supply  their  wants  at  an  easier  rate. 
A  tendency  of  this  kind,  if  real,  would  be  a  sufficient  objection 
to  the  regulation.  Nothing  which  contributes  to  change  a 
beneficial  current  of  trade,  can  well  compensate,  by  particular 
advantages,  for  so  injurious  an  effect.  It  is  far  more  easy  to 
transfer  trade  from  a  less  to  a  more  favorable  channel,  than, 
when  once  transferred,  to  bring  it  back  to  its  old  one.  Every 
source  of  artificial  interruption  to  an  advantageous  current,  is, 
therefore,  cautiously  to  be  avoided. 

It  merits  attention,  that  the  able  minister,  who  lately  and  so 
long  presided  over  the  finances  of  France,  does  not  attribute 
to  the  duty  of  coinage  in  that  country,  any  particular  advan- 
tages in  relation  to  exchange  and  trade.  Though  he  rather 
appears  an  advocate  for  it,  it  is  on  the  sole  ground  of  the 
revenue  it  affords,  which  he  represents  as  in  the  nature  of  a 
very  moderate  duty  on  the  general  mass  of  exportation. 

And  it  is  not  improbable  that,  to  the  singular  felicity  of 
situation  of  that  kingdom,  is  to  be  attributed  its  not  having 
been  sensible  of  the  evils  which  seem  incident  to  the  regulation. 
There  is,  perhaps,  no  part  of  Europe  which  has  so  little  need 
of  other  countries  as  France.  Comprehending  a  variety  of 
soils  and  climates,  an  immense  population,  its  agriculture  in  a 
state  of  mature  improvement,  it  possesses  within  its  own 
bosom,  most,  if  not  all,  the  productions  of  the  earth,  which 
any  of  its  most  favored  neighbors  can  boast.  The  variety, 
abundance,  and  excellence  of  its  wines,  constitute  a  peculiar 


6l2  CONTEST  FOR  SOUND  MONEY 

advantage  in  its  favor.  Arts  and  manufactures  are  there  also 
in  a  very  advanced  state ;  some  of  them,  of  considerable  im- 
portance, in  higher  perfection  than  elsewhere.  Its  contiguity 
to  Spain ;  the  intimate  nature  of  its  connexion  with  that 
country ;  a  country  with  few  fabrics  of  its  own,  consequently 
numerous  wants,  and  the  principal  receptacle  of  the  treasures 
of  the  new  world  :  These  circumstances  concur,  in  securing  to 
France  so  uniform  and  so  considerable  a  balance  of  trade,  as 
in  a  great  measure  to  counteract  the  natural  tendency  of  any 
errors  which  may  exist  in  the  system  of  her  mint ;  and  to 
render  inferences  from  the  operation  of  that  system  there,  in 
reference  to  this  country,  more  liable  to  mislead  than  to  in- 
struct. Nor  ought  it  to  pass  unnoticed,  that,  with  all  these 
advantages,  the  government  of  France  has  found  it  necessary, 
on  some  occasions,  to  employ  very  violent  methods  to  compel 
the  bringing  of  bullion  to  the  mint ;  a  circumstance  which 
affords  a  strong  presumption  of  the  inexpediency  of  the  regu- 
lation, and  of  the  impracticability  of  executing  it  in  the  United 
States. 

This  point  has  been  the  longer  dwelt  upon,  not  only  because 
there  is  a  diversity  of  opinion  among  speculative  men  concern- 
ing it,  and  a  diversity  in  the  practice  of  the  most  considerable 
commercial  nations,  but  because  the  acts  of  our  own  govern- 
ment, under  the  confederation,  have  not  only  admitted  the 
expediency  of  defraying  the  expense  of  coinage  out  of  the 
metals  themselves,  but  upon  this  idea  have  both  made  a  de- 
duction from  the  weight  of  the  coins,  and  established  a 
difference  between  their  regulated  value  and  the  mint  price  of 
bullion,  greater  than  would  result  from  that  deduction.  This 
double  operation  in  favor  of  a  principle  so  questionable  in  itself, 
has  made  a  more  particular  investigation  of  it  a  duty. 

The  intention,  however,  of  the  preceding  remarks,  is  rather 
to  show  that  the  expectation  of  commercial  advantages  ought 
not  to  decide  in  favor  of  a  duty  of  coinage,  and  that,  if  it 
should  be  adopted,  it  ought  not  to  be  in  the  form  of  a  deduc- 
tion from  the  intrinsic  value  of  the  coins,  than  absolutely  to 
exclude  the  idea  of  any  difference  whatever  between  the  value 
of  the  metals  in  coin  and  in  bullion.  It  is  not  clearly  dis- 
cerned that  a  small  difference  between  the  mint  price  of 
bullion,  and  the  regulated  value  of  the  coins,  would  be  per- 
nicious, or  that  it  might  not  even  be  advisable,  in  the  first 
instance,  by  way  of  experiment,  merely  as  a  preventive  to  the 
melting  down  and  exportation  of  the  coins.  This  will  now  be 
somewhat  more  particularly  considered. 

The   arguments   for   a    coinage   entirely   free,   are,   that   it 


APPENDIX  613 

preserves  the  intrinsic  value  of  the  metals ;  that  it  makes  the 
expense  of  fabrication  a  general  instead  of  a  partial  tax ;  and 
that  it  tends  to  promote  the  abundance  of  gold  and  silver, 
which,  it  is  alleged,  will  flow  to  that  place  where  they  find  the 
best  price,  and  from  that  place  where  they  are  in  any  degree 
undervalued. 

The  first  consideration  has  not  much  weight,  as  an  objection 
to  a  plan  which,  without  diminishing  the  quantity  of  metals  in 
the  coins,  merely  allows  a  less  price  for  them  in  bullion  at  the 
national  factory  or  mint.  No  rule  of  intrinsic  value  is  violated, 
by  considering  the  raw  material  as  worth  less  than  the  fabric,  in 
proportion  to  the  expense  of  fabrication.  And  by  divesting 
foreign  coins  of  the  privilege  of  circulating  as  money,  they 
become  the  raw  material. 

The  second  consideration  has  perhaps  greater  weight.  But 
it  may  not  amount  to  an  objection,  if  it  be  the  best  method  of 
preventing  disorders  in  the  coins,  which  it  is  in  a  particular 
manner  the  interest  of  those  on  whom  the  tax  would  fall  to 
prevent.  The  practice  of  taking  gold  by  weight,  which  has 
of  late  years  obtained  in  Great  Britain,  has  been  found,  in 
some  degree,  a  remedy ;  but  this  is  inconvenient,  and  may  on 
that  account  fall  into  disuse.  Another  circumstance  has  had  a 
remedial  operation.  This  is  the  delays  of  the  mint.  It  ap- 
pears to  be  the  practice  there,  not  to  make  payment  for  the 
bullion  which  is  brought  to  be  exchanged  for  coin,  till  it  either 
has  in  fact,  or  is  pretended  to  have,  undergone  the  process  of 
recoining. 

The  necessity  of  fulfilling  prior  engagements  is  a  cause  or 
pretext  for  postponing  the  delivery  of  the  coin  in  lieu  of  the 
bullion.  And  this  delay  creates  a  difference  in  the  market 
price  of  the  two  things.  Accordingly,  for  some  years  past,  an 
ounce  of  standard  gold,  which  is  worth  in  coin  £$  17  s.  \o\d. 
sterling,  has  been  in  the  market  of  London,  in  bullion,  only  ^3 
1 js.  6d.,  which  is  within  a  small  fraction  of  one-half  per  cent.  less. 
Whether  this  be  management  in  the  mint,  to  accommodate  the 
bank  in  the  purchase  of  bullion,  or  to  effect  indirectly  some- 
thing equivalent  to  a  formal  difference  of  price,  or  whether  it 
be  the  natural  course  of  the  business,  is  open  to  conjecture. 

It  at  the  same  time  indicates  that  if  the  mint  were  to  make 
prompt  payment,  at  about  half  per  cent,  less  than  it  does  at 
present,  the  state  of  bullion,  in  respect  to  coin,  would  be 
precisely  the  same  as  it  now  is.  And  it  would  be  then  certain 
that  the  Government  would  save  expense  in  the  coinage  of 
gold  ;  since  it  is  not  probable  that  the  time  actually  lost  in  the 
course  of  the  year,  in  converting  bullion  into  coin,  can  be  an 


6 14  CONTEST  FOR  SOUND  MONEY 

equivalent  to  half  per  cent,  on  the  advance,  and  there  will  gen- 
erally be  at  the  command  of  the  Treasury  a  considerable  sum 
of  money  waiting  for  some  periodical  disbursement,  which, 
without  hazard,  might  be  applied  to  that  advance. 

In  what  sense  a  free  coinage  can  be  said  to  promote  the 
abundance  of  gold  and  silver,  may  be  inferred  from  the  in- 
stances which  have  been  given  of  the  tendency  of  a  contrary 
system  to  promote  their  exportation.  It  is,  however,  not 
probable,  that  a  very  small  difference  of  value  between  coin 
and  bullion  can  have  any  effect  which  ought  to  enter  into  cal- 
culation. There  can  be  no  inducement  of  positive  profit,  to 
export  the  bullion,  as  long  as  the  difference  of  price  is  ex- 
ceeded by  the  expense  of  transportation.  And  the  prospect 
of  smaller  loss  upon  the  metals  than  upon  commodities,  when 
the  difference  is  very  minute,  will  be  frequently  overbalanced 
by  the  possibility  of  doing  better  with  the  latter,  from  a  rise  of 
markets.  It  is,  at  any  rate,  certain,  that  it  can  be  of  no  conse- 
quence in  this  view,  whether  the  superiority  of  coin  to  bull- 
ion in  the  market,  be  produced,  as  in  England,  by  the  delay 
of  the  mint,  or  by  a  formal  discrimination  in  the  regulated 
values. 

Under  an  impression  that  a  small  difference  between  the 
value  of  the  coin  and  the  mint  price  of  bullion,  is  the  least 
exceptionable  expedient  for  restraining  the  melting  down,  or 
exportation  of  the  former,  and  not  perceiving  that,  if  it  be 
a  very  moderate  one,  it  can  be  hurtful  in  other  respects  —  the 
Secretary  is  inclined  to  an  experiment  of  one  half  per  cent,  on 
each  of  the  metals.  The  fact  which  has  been  mentioned,  with 
regard  to  the  price  of  gold  bullion  in  the  English  market, 
seems  to  demonstrate  that  such  a  difference  may  safely  be 
made.  In  this  case,  there  must  be  immediate  payment  for  the 
gold  and  silver  offered  to  the  mint.  How  far  one  half  per 
cent,  will  go  towards  defraying  the  expense  of  the  coinage, 
cannot  be  determined  beforehand  with  accuracy.  It  is  pre- 
sumed that,  on  an  economical  plan,  it  will  suffice  in  relation  to 
gold.  But  it  is  not  expected  that  the  same  rate  on  silver  will 
be  sufficient  to  defray  the  expense  attending  that  metal.  Some 
additional  provision  may  therefore  be  found  necessary,  if  this 
limit  be  adopted. 

It  does  not  seem  to  be  advisable  to  make  any  greater 
difference  in  regard  to  silver  than  to  gold ;  because  it  is  de- 
sirable that  the  proportion  between  the  two  metals  in  the 
market,  should  correspond  with  that  in  the  coins,  which  would 
not  be  the  case  if  the  mint  price  of  one  was  comparatively 
lower  than  that  of  the  other ;  and  because,  also,  silver  being 


APPENDIX  615 

proposed  to  be  rated  in  respect  to  gold,  somewhat  below  its 
general  commercial  value,  if  there  should  be  a  disparity  to  its 
disadvantage  in  the  mint  prices  of  the  two  metals,  it  would  ob- 
struct too  much  the  bringing  of  it  to  be  coined,  and  would  add 
an  inducement  to  export  it.  Nor  does  it  appear  to  the  Secre- 
tary safe  to  make  a  greater  difference  between  the  value  of 
coin  and  bullion,  than  has  been  mentioned.  It  will  be  better 
to  have  to  increase  it  hereafter,  if  this  shall  be  found  expedient, 
than  to  have  to  recede  from  too  considerable  a  difference,  in 
consequence  of  evils  which  shall  have  been  experienced. 

It  is  sometimes  mentioned,  as  an  expedient,  which,  consist- 
ently with  a  free  coinage,  may  serve  to  prevent  the  evils  desired 
to  be  avoided,  to  incorporate  in  the  coins  a  greater  propor- 
tion of  alloy  than  is  usual;  regulating  their  value,  neverthe- 
less, according  to  the  quantity  of  pure  metal  they  contain. 
This,  it  is  supposed,  by  adding  to  the  difficulty  of  refining 
them,  would  cause  bullion  to  be  preferred  both  for  manufacture 
and  exportation. 

But  strong  objections  lie  against  this  scheme :  —  an  augmen- 
tation of  expense  ;  an  actual  depreciation  of  the  coin ;  a  danger 
of  still  greater  depreciation  in  the  public  opinion ;  the  facilitat- 
ing of  counterfeits ;  while  it  is  questionable  whether  it  would 
have  the  effect  expected  from  it. 

The  alloy  being  esteemed  of  no  value,  an  increase  of  it  is 
evidently  an  increase  of  expense.  This,  in  relation  to  the  gold 
coins,  particularly,  is  a  matter  of  moment.  It  has  been  noted, 
that  the  alloy  in  them  consists  partly  of  silver.  If,  to  avoid  ex- 
pense, the  addition  should  be  of  copper  only,  this  would  spoil 
the  appearance  of  the  coin,  and  give  it  a  base  countenance. 
Its  beauty  would,  indeed,  be  injured,  though  in  a  less  degree, 
even  if  the  usual  proportions  of  silver  and  copper  should  be 
maintained  in  the  increased  quantity  of  alloy. 

And  however  inconsiderable  an  additional  expenditure  of 
copper  in  the  coinage  of  a  year  may  be  deemed,  in  a  series  of 
years  it  would  become  of  consequence.  In  regulations  which 
contemplate  the  lapse  and  operation  of  ages,  a  very  small  item 
of  expense  acquires  importance. 

The  actual  depreciation  of  the  coin  by  an  increase  of  alloy, 
results  from  the  very  circumstance  which  is  the  motive  to  it  — 
the  greater  difficulty  of  refining.  In  England,  it  is  customary 
for  those  concerned  in  manufactures  of  gold  to  make  a  deduc- 
tion in  the  price  of  four  pence  sterling  per  ounce,  of  fine  gold, 
for  every  carat  which  the  mass  containing  it  is  below  the  legal 
standard.  Taking  this  as  a  rule,  an  inferiority  of  a  single  carat, 
or  one  twenty-fourth  part  in  the  gold  coins  of  the  United  States, 


616  CONTEST  FOR  SOUND  MONEY 

compared  with  the  English  standard,  would  cause  the  same 
quantity  of  pure  gold  in  them  to  be  worth  nearly  four-tenths  per 
cent,  less  than  in  the  coins  of  Great  Britain.  This  circumstance 
would  be  likely,  in  process  of  time,  to  be  felt  in  the  market  of 
the  United  States. 

A  still  greater  depreciation,  in  the  public  opinion,  would  be 
to  be  apprehended  from  the  apparent  debasement  of  the  coin. 
The  effects  of  imagination  and  prejudice  cannot  safely  be  dis- 
regarded in  anything  that  relates  to  money.  If  the  beauty  of 
the  coin  be  impaired,  it  may  be  found  difficult  to  satisfy  the 
generality  of  the  community  that  what  appears  worst  is  not 
really  less  valuable  ;  and  it  is  not  altogether  certain  that  an  im- 
pression of  its  being  so  may  not  occasion  an  unnatural  augmenta- 
tion of  prices. 

Greater  danger  of  imposition,  by  counterfeits,  is  also  to  be 
apprehended  from  the  injury  which  will  be  done  to  the  appear- 
ance of  the  coin.  It  is  a  just  observation,  that  "  the  perfection 
of  the  coins  is  a  great  safeguard  against  counterfeits."  And  it 
is  evident  that  the  color,  as  well  as  the  excellence  of  the  work- 
manship, is  an  ingredient  in  that  perfection.  The  intermixture 
of  too  much  alloy,  particularly  of  copper,  in  the  gold  coins  at 
least,  must  materially  lessen  the  facility  of  distinguishing, 
by  the  eye,  the  purer  from  the  baser  kind,  the  genuine  from 
the  counterfeit. 

The  inefficacy  of  the  arrangement  to  the  purpose  intended 
to  be  answered  by  it,  is  rendered  probable  by  different  consid- 
erations. If  the  standard  of  plate  in  the  United  States  should 
be  regulated  according  to  that  of  the  national  coins,  it  is  to  be 
expected  that  the  goldsmith  would  prefer  these  to  the  foreign 
coins,  because  he  would  find  them  prepared  to  his  hand,  in  the 
state  which  he  desires ;  whereas  he  would  have  to  expend  an 
additional  quantity  of  alloy,  to  bring  the  foreign  coins  to  that 
state.  If  the  standard  of  plate,  by  law  or  usage,  should  be 
superior  to  that  of  the  national  coins,  there  would  be  a  possi- 
bility of  the  foreign  coins  bearing  a  higher  price  in  the  market ; 
and  this  would  not  only  obstruct  their  being  brought  to  the 
mint,  but  might  occasion  the  exportation  of  the  national  coin 
in  preference.  It  is  not  understood  that  the  practice  of  making 
an  abatement  of  price  for  the  inferiority  of  standard  is  appli- 
cable to  the  English  mint ;  and  if  it  be  not,  this  would  also  con- 
tribute to  frustrating  the  expected  effect  from  the  increase  of 
alloy.  For,  in  this  case,  a  given  quantity  of  pure  metal,  in  our 
standard,  would  be  worth  as  much  there  as  in  bullion  of  the 
English  or  any  other  standard. 

Considering,  therefore,  the  uncertainty  of  the  success  of  the 


APPENDIX  617 

expedient,  and  the  inconveniences  which  seem  incident  to  it,  it 
would  appear  preferable  to  submit  to  those  of  a  free  coinage. 
It  is  observable,  that  additional  expense,  which  is  one  of  the 
principal  of  these,  is  also  applicable  to  the  proposed  remedy. 

It  is  now  proper  to  resume  and  finish  the  answer  to  the  first 
question,  in  order  to  which  the  three  succeeding  ones  have 
necessarily  been  anticipated.  The  conclusion  to  be  drawn  from 
the  observations  which  have  been  made  on  the  subject,  is  this : 
That  the  unit,  in  the  coins  of  the  United  States,  ought  to  cor- 
respond with  24  grains  and  f  of  a  grain  of  pure  gold,  and  with 
371  grains  and  \  of  a  grain  of  pure  silver,  each  answering  to  a 
dollar  in  the  money  of  account.  The  former  is  exactly  agree- 
able to  the  present  value  of  gold,  and  the  latter  is  within  a  small 
fraction  of  the  mean  of  the  two  last  emissions  of  dollars  —  the 
only  ones  which  are  now  found  in  common  circulation,  and  of 
which  the  newest  is  in  the  greatest  abundance.  The  alloy  in  each 
case  to  be  one-twelfth  of  the  total  weight,  which  will  make  the 
unit  27  grains  of  standard  gold,  and  405  grains  of  standard  silver. 

Each  of  these,  it  has  been  remarked,  will  answer  to  a  dollar 
in  the  money  of  account.  It  is  conceived  that  nothing  better 
can  be  done  in  relation  to  this,  than  to  pursue  the  track  marked 
out  by  the  resolution  of  the  8th  of  August,  1786.  This  has  been 
approved  abroad,  as  well  as  at  home,  and  it  is  certain  that  nothing 
can  be  more  simple  or  convenient,  than  the  decimal  subdivisions. 
There  is  every  reason  to  expect  that  the  method  will  speedily 
grow  into  general  use,  when  it  shall  be  seconded  by  correspond- 
ing coins.  On  this  plan,  the  unit  in  the  money  of  account  will 
continue  to  be,  as  established  by  that  resolution,  a  dollar ;  and 
its  multiples,  dimes,  cents,  and  mills,  or  tenths,  hundredths,  and 
thousandths. 

With  regard  to  the  number  of  different  pieces  which  shall 
compose  the  coins  of  the  United  States,  two  things  are  to  be 
consulted  —  convenience  of  circulation,  and  cheapness  of  the 
coinage.  The  first  ought  not  to  be  sacrificed  to  the  last ;  but 
as  far  as  they  can  be  reconciled  to  each  other,  it  is  desirable  to 
do  it.  Numerous  and  small  (if  not  too  minute)  subdivisions 
assist  circulation  ;  but  the  multiplication  of  the  smaller  kinds 
increases  expense ;  the  same  process  being  necessary  to  a  small 
as  to  a  large  piece. 

As  it  is  easy  to  add,  it  will  be  most  adviseable  to  begin  with 
a  small  number,  till  experience  shall  decide  whether  any  other 
kinds  are  necessary.  The  following,  it  is  conceived,  will  be 
sufficient  in  the  commencement : 

One  gold  piece,  equal  in  weight  and  value  to  ten  units  or 
dollars. 


618  CONTEST  FOR  SOUND  MONEY 

One  gold  piece,  equal  to  a  tenth  part  of  the  former,  and 
which  shall  be  a  unit  or  dollar. 

One  silver  piece,  which  shall  also  be  a  unit  or  dollar. 

One  silver  piece,  which  shall  be,  in  weight  and  value,  a  tenth 
part  of  the  silver  unit  or  dollar. 

One  copper  piece,  which  shall  be  of  the  value  of  a  hundredth 
part  of  a  dollar. 

One  other  copper  piece,  which  shall  be  half  the  value  of  the 
former. 

It  is  not  proposed  that  the  lightest  of  the  two  gold  coins 
should  be  numerous,  as,  in  large  payments,  the  larger  the  pieces 
the  shorter  the  process  of  counting,  the  less  risk  of  mistake, 
and,  consequently,  the  greater  the  safety  and  the  convenience ; 
and,  in  small  payments,  it  is  not  perceived  that  any  inconven- 
ience can  accrue  from  an  entire  dependence  on  the  silver  and 
copper  coins.  The  chief  inducement  to  the  establishment  of 
the  small  gold  piece,  is  to  have  a  sensible  object  in  that  metal, 
as  well  as  in  silver,  to  express  the  unit.  Fifty  thousand  at  a 
time  in  circulation  may  suffice  for  this  purpose. 

The  tenth  part  of  a  dollar  is  but  a  small  piece,  and,  with  the 
aid  of  the  copper  coins,  will  probably  suffice  for  all  the  more 
minute  uses  of  circulation.  It  is  less  than  the  least  of  the  silver 
coins  now  in  general  currency  in  England. 

The  largest  copper  piece  will  nearly  answer  to  the  half-penny 
sterling,  and  the  smallest,  of  course,  to  the  farthing.  Pieces  of 
very  small  value  are  a  great  accommodation,  and  the  means  of 
a  beneficial  economy  to  the  poor,  by  enabling  them  to  purchase, 
in  small  portions,  and  at  a  more  reasonable  rate,  the  necessa- 
ries of  which  they  stand  in  need.  If  there  are  only  cents,  the 
lowest  price  for  any  portion  of  a  vendible  commodity,  however 
inconsiderable  in  quantity,  will  be  a  cent ;  if  there  are  half  cents, 
it  will  be  a  half-cent ;  and,  in  a  great  number  of  cases,  exactly 
the  same  things  will  be  sold  for  a  half-cent  which,  if  there  were 
none,  would  cost  a  cent.  But  a  half-cent  is  low  enough  for  the 
minimum  of  price.  Excessive  minuteness  would  defeat  its 
object.  To  enable  the  poorer  classes  to  procure  necessaries 
cheap,  is  to  enable  them,  with  more  comfort  to  themselves, 
to  labor  for  less ;  the  advantages  of  which  need  no  com- 
ment. 

The  denominations  of  the  silver  coins  contained  in  the 
resolution  of  the  8th  of  August,  1786,  are  conceived  to  be  sig- 
nificant and  proper.  The  dollar  is  recommended  by  its  corre- 
spondency with  the  present  coin  of  that  name,  for  which  it  is 
designed  to  be  a  substitute,  which  will  facilitate  its  ready  adop- 
tion as  such  in  the  minds  of  the  citizens.     The  dime,  or  tenth, 


APPENDIX  619 

the  cent,  or  hundredth,  the  mill,  or  thousandth,  are  proper, 
because  they  express  the  proportions  which  they  are  intended 
to  designate.  It  is  only  to  be  regretted  that  the  meaning  of 
these  terms  will  not  be  familiar  to  those  who  are  not  acquainted 
with  the  language  from  which  they  are  borrowed.  It  were  to 
be  wished  that  the  length,  and,  in  some  degree,  the  clumsiness, 
of  some  of  the  corresponding  terms  in  English  did  not  discour- 
age from  preferring  them.  It  is  useful  to  have  names  which 
signify  the  things  to  which  they  belong;  and,  in  respect  to 
objects  of  general  use,  in  a  manner  intelligible  to  all.  Perhaps 
it  might  be  an  improvement  to  let  the  dollar  have  the  appella- 
tion either  of  dollar  or  unit,  (which  last  will  be  the  most  sig- 
nificant,) and  to  substitute  "  tenth  "  for  dime.  In  time,  the  unit 
may  succeed  to  the  dollar.  The  word  "  cent,"  being  in  use  in 
various  transactions  and  instruments,  will,  without  much  diffi- 
culty, be  understood  as  the  hundredth ;  and  the  half-cent,  of 
course,  as  the  two  hundredth  part. 

The  eagle  is  not  a  very  expressive  or  apt  appellation  for  the 
largest  gold  piece  ;  but  nothing  better  occurs.  The  smallest 
of  the  two  gold  coins  may  be  called  the  dollar  or  unit,  in  com- 
mon with  the  silver  piece,  with  which  it  coincides. 

The  volume  or  size  of  each  piece  is  a  matter  of  more  conse- 
quence than  its  denomination.  It  is  evident  that  the  more 
superficies  or  surface,  the  more  the  piece  will  be  liable  to  be 
injured  by  friction ;  or,  in  other  words,  the  faster  it  will  wear. 
For  this  reason,  it  is  desirable  to  render  the  thickness  as  great, 
in  proportion  to  the  breadth,  as  may  consist  with  neatness  and 
good  appearance.  Hence,  the  form  of  the  double  guinea,  or 
double  louis-d'or,  is  preferable  to  that  of  the  half  Johannes  for 
the  large  gold  piece.  The  small  one  cannot  well  be  of  any 
other  size  than  the  Portuguese  piece  of  eight,  of  the  same 
metal. 

As  it  is  of  consequence  to  fortify  the  idea  of  the  identity  of 
the  dollar,  it  may  be  best  to  let  the  form  and  size  of  the  new 
one,  as  far  as  the  quantity  of  matter  (the  alloy  being  less)  per- 
mits, agree  with  the  form  and  size  of  the  present.  The  diam- 
eter may  be  the  same. 

The  tenths  may  be  in  a  mean  between  the  Spanish  \  and  -fa 
of  a  dollar. 

The  copper  coins  may  be  formed  merely  with  a  view  to  good 
appearance,  as  any  difference  in  the  wearing  that  can  result 
from  difference  of  form,  can  be  of  little  consequence  in  refer- 
ence to  that  metal. 

It  is  conceived  that  the  weight  of  the  cent  may  be  eleven 
pennyweight ;  which  will  about  correspond  with  the  value  of 


620  CONTEST  FOR  SOUND  MONEY 

the  copper  and  the  expense  of  coinage.  This  will  be  to  con- 
form to  the  rule  of  intrinsic  value,  as  far  as  regard  to  the  con- 
venient size  of  the  coins  will  permit ;  and  the  deduction  of  the 
expense  of  coinage  in  this  case  will  be  the  more  proper,  as  the 
copper  coins,  which  have  been  current  hitherto,  have  passed 
till  lately  for  much  more  than  their  intrinsic  value.  Taking 
the  weight  as  has  been  suggested,  the  size  of  the  cent  may 
be  nearly  that  of  the  piece  herewith  transmitted,  which  weighs 
lodwt.  ngrs.  iom.  Two-thirds  of  the  diameter  of  the  cent 
will  suffice  for  the  diameter  of  the  half  cent. 

It  may,  perhaps,  be  thought  expedient,  according  to  general 
practice,  to  make  the  copper  coinage  an  object  of  profit ;  but 
where  this  is  done  to  any  considerable  extent,  it  is  hardly  pos- 
sible to  have  effectual  security  against  counterfeits.  This  con- 
sideration, concurring  with  the  soundness  of  the  principle  of 
preserving  the  intrinsic  value  of  the  money  of  a  country,  seems 
to  outweigh  the  consideration  of  profit. 

The  foregoing  suggestions,  respecting  the  sizes  of  the  several 
coins,  are  made  on  the  supposition  that  the  legislature  may 
think  fit  to  regulate  this  matter.  Perhaps,  however,  it  may  be 
judged  not  unadviseable  to  leave  it  to  executive  discretion. 

With  regard  to  the  proposed  size  of  the  cent,  it  is  to  be  con- 
fessed, that  it  is  rather  greater  than  might  be  wished,  if  it  could 
with  propriety  and  safety  be  made  less :  and  should  the  value 
of  copper  continue  to  decline,  as  it  has  done  for  some  time 
past,  it  is  very  questionable  whether  it  will  long  remain  alone  a 
fit  metal  for  money.  This  has  led  to  a  consideration  of  the  ex- 
pediency of  uniting  a  small  proportion  of  silver  with  the  copper, 
in  order  to  be  able  to  lessen  the  bulk  of  the  inferior  coins.  For 
this,  there  are  precedents  in  several  parts  of  Europe.  In 
France,  the  composition  which  is  called  billion,  has  consisted 
of  one  part  silver  and  four  parts  copper ;  according  to  which 
proportion,  a  cent  might  contain  17  grains,  defraying  out 
of  the  material  the  expense  of  coinage.  The  conveniency  of 
size  is  a  recommendation  of  such  a  species  of  coin  ;  but  the 
Secretary  is  deterred  from  proposing  it,  by  the  apprehension  of 
counterfeits.  The  effect  of  so  small  a  quantity  of  silver,  in  com- 
paratively so  large  a  quantity  of  copper,  could  easily  be  imitated 
by  a  mixture  of  other  metals  of  little  value,  and  the  temptation 
to  doing  it  would  not  be  inconsiderable. 

The  devices  of  the  coins  are  far  from  being  matters  of  indif- 
ference, as  they  may  be  made  the  vehicles  of  useful  impressions. 
They  ought,  therefore,  to  be  emblematical,  but  without  losing 
sight  of  simplicity.  The  fewer  sharp  points  and  angles  there 
are,  the  less  will  be  the  loss  by  wearing.     The  Secretary  thinks 


APPENDIX  621 

it  best,  on  this  head,  to  confine  himself  to  these  concise  and 
general  remarks. 

The  last  point  to  be  discussed,  respects  the  currency  of 
foreign  coins. 

The  abolition  of  this,  in  proper  season,  is  a  necessary  part  of 
the  system  contemplated  for  the  national  coinage.  But  this  it 
will  be  expedient  to  defer,  till  some  considerable  progress  has 
been  made  in  preparing  substitutes  for  them.  A  gradation  may, 
therefore,  be  found  most  convenient. 

The  foreign  coins  may  be  suffered  to  circulate,  precisely  upon 
their  present  footing,  for  one  year  after  the  mint  shall  have 
commenced  its  operations.  The  privilege  may  then  be  con- 
tinued for  another  year,  to  the  gold  coins  of  Portugal,  England, 
and  France,  and  to  the  silver  coins  of  Spain.  And  these  may 
still  be  permitted  to  be  current  for  one  year  more,  at  the  rates 
allowed  to  be  given  for  them  at  the  mint ;  after  the  expiration 
of  which,  the  circulation  of  all  foreign  coins  to  cease. 

The  moneys  which  will  be  paid  into  the  Treasury  during  the 
first  year,  being  re-coined  before  they  are  issued  anew,  will 
afford  a  partial  substitute,  before  any  interruption  is  given  to  the 
pre-existing  supplies  of  circulation.  The  revenues  of  the  suc- 
ceeding year,  and  the  coins  which  will  be  brought  to  the  mint, 
in  consequence  of  the  discontinuance  of  their  currency,  will 
materially  extend  the  substitute  in  the  course  of  that  year ;  and 
its  extension  will  be  so  far  increased,  during  the  third  year,  by 
the  facility  of  procuring  the  remaining  species  to  be  re-coined, 
which  will  arise  from  the  diminution  of  their  current  values,  as 
probably  to  enable  the  dispensing  wholly  with  the  circulation 
of  the  foreign  coins  after  that  period.  The  progress  which  the 
currency  of  bank  bills  will  be  likely  to  have  made,  during  the 
same  time,  will  also  afford  a  substitute  of  another  kind. 

This  arrangement,  besides  avoiding  a  sudden  stagnation  of 
circulation,  will  cause  a  considerable  proportion  of  whatever 
loss  may  be  incident  to  the  establishment,  in  the  first  instance, 
to  fall,  as  it  ought  to  do,  upon  the  Government,  and  will  proba- 
bly tend  to  distribute  the  remainder  of  it  more  equally  among 
the  community. 

It  may,  nevertheless,  be  advisable,  in  addition  to  the  precau- 
tions here  suggested,  to  repose  a  discretionary  authority  in  the 
President  of  the  United  States  to  continue  the  currency  of  the 
Spanish  dollar,  at  a  value  corresponding  with  the  quantity  of 
fine  silver  contained  in  it,  beyond  the  period  above  mentioned, 
for  the  cessation  of  the  circulation  of  the  foreign  coins.  It  is 
possible  that  an  exception  in  favor  of  this  particular  species  of 
coin  may  be  found  expedient ;  and  it  may  tend  to  obviate  in- 


622  CONTEST  FOR  SOUND  MONEY 

conveniences,  if  there  be  a  power  to  make  the  exception,  in  a 
capacity  to  be  exerted  when  the  period  shall  arrive. 

The  Secretary  for  the  Department  of  State,  in  his  report  to 
the  House  of  Representatives,  on  the  subject  of  establishing  a 
uniformity  in  the  weights,  measures,  and  coins  of  the  United 
States,  has  proposed  that  the  weight  of  the  dollar  should  corre- 
spond with  the  unit  of  weight.  This  was  done  on  the  supposi- 
tion that  it  would  require  but  a  very  small  addition  to  the 
quantity  of  metal  which  the  dollar,  independently  of  the  object 
he  had  in  view,  ought  to  contain ;  in  which  he  was  guided 
by  the  resolution  of  the  8th  of  August,  1786,  fixing  the  dollar 
at  375  grains  and  64  hundredths  of  a  grain. 

Taking  this  as  the  proper  standard  of  the  dollar,  a  small 
alteration,  for  the  sake  of  incorporating  so  systematic  an  idea, 
would  appear  desirable.  But,  if  the  principles  which  have  been 
reasoned  from,  in  this  report,  are  just,  the  execution  of  that  idea 
becomes  more  difficult.  It  would  certainly  not  be  advisable 
to  make,  on  that  account,  so  considerable  a  change  in  the 
money  unit,  as  would  be  produced  by  the  addition  of  5 
grains  of  silver  to  the  proper  weight  of  the  dollar,  without  a 
proportional  augmentation  of  its  relative  value ;  and  to  make 
such  an  augmentation  would  be  to  abandon  the  advantage  of 
preserving  the  identity  of  the  dollar,  or  to  speak  more  accu- 
rately, of  having  the  proposed  one  received  and  considered  as 
a  mere  substitute  for  the  present. 

The  end  may,  however,  be  obtained,  without  either  of  these 
inconveniences,  by  increasing  the  proportion  of  alloy  in  the 
silver  coins.  But  this  would  destroy  the  uniformity,  in  that 
respect,  between  the  gold  and  silver  coins.  It  remains,  there- 
fore, to  elect  which  of  the  two  systematic  ideas  shall  be  pur- 
sued or  relinquished ;  and  it  may  be  remarked,  that  it  will  be 
more  easy  to  convert  the  present  silver  coins  into  the  proposed 
ones,  if  these  last  have  the  same,  or  nearly  the  same  proportion 
of  alloy,  than  if  they  have  less. 

The  organization  of  the  Mint,  yet  remains  to  be  considered. 

This  relates  to  the  persons  to  be  employed,  and  to  the  ser- 
vices which  they  are  respectively  to  perform.  It  is  conceived 
that  there  ought  to  be  — 

A  Director  of  the  Mint ;  to  have  the  general  superintendence 
of  the  business. 

An  Assay  Master,  or  Assayer ;  to  receive  the  metals  brought 
to  the  Mint,  ascertain  their  fineness,  and  deliver  them  to  be 
coined. 

A  Master  Coiner  ;  to  conduct  the  making  of  the  coins. 

A  Cashier ;  to  receive  and  pay  them  out. 


APPENDIX  623 

An  Auditor  ;  to  keep  and  adjust  the  accounts  of  the  Mint. 

Clerks ;  as  many  as  the  Directors  of  the  Mint  shall  deem 
necessary,  to  assist  the  different  officers. 

Workmen ;  as  many  as  may  be  found  requisite. 

A  Porter. 

In  several  of  the  European  Mints,  there  are  various  other 
officers,  but  the  foregoing  are  those  only  who  appear  to  be 
indispensable.  Persons  in  the  capacity  of  clerks,  will  suffice 
instead  of  the  others,  with  the  advantage  of  greater  economy. 

The  number  of  workmen  is  left  indefinite,  because,  at  certain 
times,  it  is  requisite  to  have  more  than  at  others.  They  will, 
however,  never  be  numerous.  The  expense  of  the  establish- 
ment, in  an  ordinary  year,  will  probably  be  from  fifteen  to 
twenty  thousand  dollars. 

The  remedy  for  errors  in  the  weight  and  alloy  of  the  coins, 
must  necessarily  form  a  part,  in  the  system  of  a  mint ;  and 
the  manner  of  applying  it  will  require  to  be  regulated.  The 
following  account  is  given  of  the  practice  in  England,  in  this 
particular : 

A  certain  number  of  pieces  are  taken  promiscuously  out  of 
every  fifteen  pounds  of  gold,  coined  at  the  Mint,  which  are 
deposited,  for  safe  keeping,  in  a  strong  box,  called  the  pix. 
This  box,  from  time  to  time,  is  opened  in  the  presence  of  the 
Lord  Chancellor,  the  officers  of  the  Treasury,  and  others,  and 
portions  are  selected  from  the  pieces  of  each  coinage,  which 
are  melted  together,  and  the  mass  assayed  by  a  jury  of  the 
Company  of  Goldsmiths.  If  the  imperfection  and  deficiency, 
both  in  fineness  and  weight,  fall  short  of  a  sixth  of  a  carat,  or 
40  grains  of  pure  gold,  upon  a  pound  of  standard,  the  master 
of  the  Mint  is  held  excusable ;  because,  it  is  supposed,  that  no 
workman  can  reasonably  be  answerable  for  greater  exactness. 
The  expediency  of  some  similar  regulation  seems  to  be  manifest. 
All  which  is  humbly  submitted. 

Alexander  Hamilton, 
.    Secretary  of  the  Treasury. 

Mr.  Jefferson  to  Col.  Hamilton  ' 

February  —  1792. 
Dear  Sir  :  I  return  you  the  report  on  the  mint,  which  I  have 
read  over  with  a  great  deal  of  satisfaction.  I  concur  with  you 
in  thinking  that  the  unit  must  stand  on  both  metals,  that  the 
alloy  should  be  the  same  in  both,  also  in  the  proportion  you 
establish  between  the  value  of  the  two  metals.     As  to  the  ques- 

1  From  Jefferson's  Works,  Vol.  III.,  p.  330. 


624  CONTEST  FOR  SOUND  MONEY 

tion  on  whom  the  expense  of  coinage  is  to  fall,  I  have  been  so 
little  able  to  make  up  an  opinion  satisfactory  to  myself  as  to 
be  ready  to  concur  in  either  decision.  With  respect  to  the 
dollar,  it  must  be  admitted  by  all  the  world,  that  there  is  great 
incertainty  in  the  meaning  of  the  term,  and  therefore  all  the 
world  will  have  justified  Congress  for  their  first  act  of  removing 
the  incertainty  by  declaring  what  they  understand  by  the  term, 
but  the  incertainty  once  removed,  exists  no  longer,  and  I  very 
much  doubt  a  right  now  to  change  the  value  and  especially  to 
lessen  it.  It  would  lead  to  so  easy  a  mode  of  paying  off  their 
debts.  Besides,  the  parties  injured  by  this  reduction  of  the 
value  would  have  so  much  matter  to  urge  in  support  of  the 
first  point  of  fixation.  Should  it  be  thought,  however,  that 
Congress  may  reduce  the  value  of  the  dollar,  I  should  be  for 
adopting  for  our  unit,  instead  of  the  dollar,  either  one  ounce 
of  pure  silver,  or  one  ounce  of  standard  silver,  so  as  to  keep 
the  unit  of  money  a  part  of  the  system  of  measures,  weights 
and  coins.  I  hazard  these  thoughts  to  you  extempore,  and  am. 
dear  sir,  respectfully  and  affectionately. 


REPORT  OF  ALEXANDER  HAMILTON  WHILE  SECRETARY 
OF  THE  TREASURY  ON  THE  SUBJECT  OF  A  NATIONAL 
BANK 

Read  in  the  House  of  Representatives,  Dec.  13,  1790 

In  obedience  to  the  order  of  the  House  of  Representatives,  of 
the  ninth  day  of  August  last,  requiring  the  Secretary  of 
the  Treasury  to  prepare  and  report,  on  this  day,  such 
further  provision  as  may,  in  his  opinion,  be  necessary  for 
establishing  the  Public  Credit,  the  said  Secretary  further 
respectfully  reports :  — 

That,  from  a  conviction  (as  suggested  in  his  report  No.  1, 
herewith  presented)  that  a  National  Bank  is  an  institution  of 
primary  importance  to  the  prosperous  administration  of  the 
finances,  and  would  be  of  the  greatest  utility  in  the  operations 
connected  with  the  support  of  the  public  credit,  his  attention 
has  been  drawn  to  devising  the  plan  of  such  an  institution  upon 
a  scale  which  will  entitle  it  to  the  confidence,  and  be  likely  to 
render  it  equal  to  the  exigencies,  of  the  public. 

Previously  to  entering  upon  the  detail  of  this  plan,  he 
entreats  the  indulgence  of  the  House  towards  some  preliminary 
reflections  naturally  arising  out  of  the  subject,  which  he  hopes 


APPENDIX  625 

will  be  deemed  neither  useless  nor  out  of  place.  Public 
opinion  being  the  ultimate  arbiter  of  every  measure  of  Govern- 
ment, it  can  scarcely  appear  improper,  in  deference  to  that,  to 
accompany  the  origination  of  any  new  proposition  with  explana- 
tions, which  the  superior  information  of  those  to  whom  it  is 
immediately  addressed  would  render  superfluous. 

It  is  a  fact,  well  understood,  that  public  banks  have  found 
admission  and  patronage  among  the  principal  and  most 
enlightened  commercial  nations.  They  have  successively 
obtained  in  Italy,  Germany,  Holland,  England  and  France,  as 
well  as  in  the  United  States.  And  it  is  a  circumstance  which 
cannot  but  have  considerable  weight,  in  a  candid  estimate  of 
their  tendency,  that,  after  an  experience  of  centuries,  there 
exists  not  a  question  about  their  utility  in  the  countries  in 
which  they  have  been  so  long  established.  Theorists  and  men 
of  business  unite  in  the  acknowledgment  of  it. 

Trade  and  industry,  wherever  they  have  been  tried,  have 
been  indebted  to  them  for  important  aid ;  and  Government  has 
been  repeatedly  under  the  greatest  obligations  to  them  in 
dangerous  and  distressing  emergencies.  That  of  the  United 
States,  as  well  in  some  of  the  most  critical  conjunctures  of  the 
late  war,  as  since  the  peace,  has  received  assistance  from 
those  established  among  us,  with  which  it  could  not  have 
dispensed. 

With  this  two-fold  evidence  before  us,  it  might  be  expected 
that  there  would  be  a  perfect  union  of  opinions  in  their  favor. 
Yet  doubts  have  been  entertained ;  jealousies  and  prejudices 
have  circulated ;  and  though  the  experiment  is  every  day 
dissipating  them,  within  the  spheres  in  which  effects  are  best 
known,  yet  there  are  still  persons  by  whom  they  have  not  been 
entirely  renounced.  To  give  a  full  and  accurate  view  of  the 
subject  would  be  to  make  a  treatise  of  a  report ;  but  there  are 
certain  aspects  in  which  it  may  be  cursorily  exhibited,  which 
may  perhaps  conduce  to  a  just  impression  of  its  merits.  These 
will  involve  a  comparison  of  the  advantages  with  the  disad- 
vantages, real  or  supposed,  of  such  institutions. 

The  following  are  among  the  principal  advantages  of  a 
bank  :  — 

First.  The  augmentation  of  the  active  or  productive  capital 
of  a  country.  Gold  and  silver,  where  they  are  employed 
merely  as  the  instruments  of  exchange  and  alienation,  have 
been  not  improperly  denominated  dead  stock ;  but  when 
deposited  in  banks,  to  become  the  basis  of  a  paper  circulation, 
which  takes  their  character  and  place,  as  the  signs  or  repre- 
sentatives of  value,  they  then  acquire  life,  or,  in  other  words, 


626  CONTEST  FOR  SOUND  MONEY 

an  active  and  productive  quality.  This  idea,  which  appears 
rather  subtile  and  abstract,  in  a  general  form,  may  be  made 
obvious  and  palpable,  by  entering  into  a  few  particulars.  It  is 
evident,  for  instance,  that  the  money  which  a  merchant  keeps 
in  his  chest,  waiting  for  a  favorable  opportunity  to  employ  it, 
produces  nothing  till  that  opportunity  arrives.  But  if,  instead 
of  locking  it  up  in  this  manner,  he  either  deposits  it  in  a  bank, 
or  invests  it  in  the  stock  of  a  bank,  it  yields  a  profit  during  the 
interval,  in  which  he  partakes,  or  not,  according  to  the  choice 
he  may  have  made  of  being  a  depositor,  or  a  proprietor ;  and 
when  any  advantageous  speculation  offers,  in  order  to  be  able 
to  embrace  it,  he  has  only  to  withdraw  his  money,  if  a  depositor, 
or,  if  a  proprietor,  to  obtain  a  loan  from  the  bank,  or  to  dis- 
pose of  his  stock  ;  an  alternative  seldom  or  never  attended  with 
difficulty,  when  the  affairs  of  the  institution  are  in  a  prosperous 
train.  His  money,  thus  deposited  or  invested,  is  a  fund  upon 
which  himself  and  others  can  borrow  to  a  much  larger  amount. 
It  is  a  well  established  fact,  that  banks  in  good  credit  can  cir- 
culate a  far  greater  sum  than  the  actual  quantum  of  their 
capital  in  gold  and  silver.  The  extent  of  the  possible  excess 
seems  indeterminate ;  though  it  has  been  conjecturally  stated 
at  the  proportions  of  two  and  three  to  one.  This  faculty  is 
produced  in  various  ways.  First :  A  great  proportion  of  the 
notes  which  are  issued  and  pass  current  as  cash,  are  indefinitely 
suspended  in  circulation,  from  the  confidence  which  each 
holder  has,  that  he  can  at  any  moment  turn  them  into  gold  and 
silver.  Secondly :  Every  loan  which  a  bank  makes,  is,  in  its 
first  shape,  a  credit  given  to  the  borrower  on  its  books,  the 
amount  of  which  it  stands  ready  to  pay,  either  in  its  own 
notes,  or  in  gold  or  silver,  at  his  option.  But,  in  a  great 
number  of  cases,  no  actual  payment  is  made  in  either.  The 
borrower  frequently,  by  a  check  or  order,  transfers  his  credit 
to  some  other  person,  to  whom  he  has  a  payment  to  make ; 
who,  in  his  turn,  is  as  often  content  with  a  similar  credit,  be- 
cause he  is  satisfied  that  he  can,  whenever  he  pleases,  either 
convert  it  into  cash,  or  pass  it  to  some  other  hand,  as  equivalent 
for  it.  And  in  this  manner  the  credit  keeps  circulating,  per- 
forming in  every  stage  the  office  of  money,  till  it  is  extinguished 
by  a  discount  with  some  person  who  has  a  payment  to  make  to 
the  bank,  to  an  equal  or  greater  amount.  Thus  large  sums  are 
lent  and  paid,  frequently  through  a  variety  of  hands,  without 
the  intervention  of  a  single  piece  of  coin.  Thirdly  :  There  is 
always  a  large  quantity  of  gold  and  silver  in  the  repositories  of 
the  bank,  besides  its  own  stock,  which  is  placed  there  with  a 
view  partly  to  its  safe  keeping,  and  partly  to  the  accommoda- 


APPENDIX  627 

tion  of  an  institution  which  is  itself  a  source  of  general  accom- 
modation. These  deposits  are  of  immense  consequence  in  the 
operations  of  a  bank.  Though  liable  to  be  redrawn  at  any 
moment,  experience  proves  that  the  money  so  much  oftener 
changes  proprietors  than  place,  and  that  what  is  drawn  out  is 
generally  so  speedily  replaced  as  to  authorize  the  counting 
upon  the  sums  deposited  as  an  effective  fund ;  which,  con- 
curring with  the  stock  of  the  bank,  enables  it  to  extend  its 
loans  and  to  answer  all  the  demands  for  coin,  whether  in  con- 
sequence of  those  loans,  or  arising  from  the  occasional  return 
of  its  notes. 

These  different  circumstances  explain  the  manner  in  which 
the  ability  of  a  bank  to  circulate  a  greater  sum  than  its  actual 
capital  in  coin  is  acquired.  This,  however,  must  be  gradual, 
and  must  be  preceded  by  a  firm  establishment  of  confidence ; 
a  confidence  which  may  be  bestowed  on  the  most  rational 
grounds,  since  the  excess  in  question  will  always  be  bottomed 
on  good  security  of  one  kind  or  another.  This,  every  well 
conducted  bank  carefully  requires,  before  it  will  consent  to 
advance  either  its  money  or  its  credit ;  and  where  there  is  an 
auxiliary  capital,  (as  will  be  the  case  in  the  plan  hereafter  sub- 
mitted,) which,  together  with  the  capital  in  coin,  define  the 
boundary  that  shall  not  be  exceeded  by  the  engagements  of 
the  bank,  the  security  may,  consistently  with  all  the  maxims  of 
a  reasonable  circumspection,  be  regarded  as  complete. 

The  same  circumstances  illustrate  the  truth  of  the  position 
that  it  is  one  of  the  properties  of  banks  to  increase  the  active 
capital  of  a  country.  This,  in  other  words,  is  the  sum  of 
them  :  The  money  of  one  individual,  while  he  is  waiting  for  an 
opportunity  to  employ  it,  by  being  either  deposited  in  the  bank 
for  safe  keeping,  or  invested  in  its  stock,  is  in  a  good  condition 
to  administer  to  the  wants  of  others,  without  being  put  out  of 
his  own  reach  when  occasion  presents.  This  yields  an  extra 
profit,  arising  from  what  is  paid  for  the  use  of  his  money  by 
others,  when  he  could  not  himself  make  use  of  it,  and  keeps 
the  money  itself  in  a  state  of  incessant  activity.  In  the  almost 
infinite  vicissitudes  and  competitions  of  mercantile  enterprise, 
there  never  can  be  danger  of  an  intermission  of  demand,  or 
that  the  money  will  remain  for  a  moment  idle  in  the  vaults 
of  the  bank.  This  additional  employment  given  to  money,  and 
the  faculty  of  a  bank  to  lend  and  circulate  a  greater  sum  than 
the  amount  of  its  stock  in  coin,  are,  to  all  the  purposes  of 
trade  and  industry,  an  absolute  increase  of  capital.  Purchases 
and  undertakings,  in  general,  can  be  carried  on  by  any  given 
sum  of  bank  paper  or  credit,  as  effectually  as  by  an  equal  sum 


628  CONTEST  FOR  SOUND  MONEY 

of  gold  and  silver.  And  thus,  by  contributing  to  enlarge  the 
mass  of  industrious  and  commercial  enterprise,  banks  become 
nurseries  of  national  wealth;  a  consequence  as  satisfactorily 
verified  by  experience,  as  it  is  clearly  deducible  in  theory. 

Secondly.  Greater  facility  to  the  Government  in  obtaining 
pecuniary  aids,  especially  in  sudden  emergencies.  This  is 
another,  and  an  undisputed  advantage  of  public  banks ;  one 
which,  as  already  remarked,  has  been  realized  in  signal  instances 
among  ourselves.  The  reason  is  obvious :  the  capitals  of  a 
great  number  of  individuals  are,  by  this  operation,  collected  to 
a  point  and  placed  under  one  direction.  The  mass  formed  by 
this  union,  is,  in  a  certain  sense,  magnified  by  the  credit  at- 
tached to  it ;  and  while  this  mass  is  always  ready,  and  can  at 
once  be  put  in  motion  in  aid  of  the  Government,  the  interest 
of  the  bank  to  afford  that  aid,  independent  of  regard  to  the 
public  safety  and  welfare,  is  a  sure  pledge  for  its  disposition  to 
go  as  far  in  its  compliances  as  can  in  prudence  be  desired. 
There  is,  in  the  nature  of  things,  as  will  be  more  particularly 
noticed  in  another  place,  an  intimate  connection  of  interest 
between  the  Government  and  the  bank  of  a  nation. 

Thirdly.  The  facilitating  of  the  payment  of  taxes.  This 
advantage  is  produced  in  two  ways.  Those  who  are  in  a  situa- 
tion to  have  access  to  the  bank,  can  have  the  assistance  of 
loans,  to  answer,  with  punctuality,  the  public  calls  upon  them. 
This  accommodation  has  been  sensibly  felt  in  the  payment  of 
the  duties  heretofore  laid,  by  those  who  reside  where  establish- 
ments of  this  nature  exist.  This,  however,  though  an  extensive, 
is  not  a  universal  benefit.  The  other  way  in  which  the  effect 
here  contemplated  is  produced,  and  in  which  the  benefit  is 
general,  is  the  increasing  of  the  quantity  of  circulating  medium, 
and  the  quickening  of  circulation.  The  manner  in  which  the 
first  happens  has  already  been  traced.  The  last  may  require 
some  illustration.  When  payments  are  to  be  made  between 
different  places  having  an  intercourse  of  business  with  each 
other,  if  there  happen  to  be  no  private  bills  at  market,  and 
there  are  no  bank  notes  which  have  a  currency  in  both,  the 
consequence  is,  that  coin  must  be  remitted ;  this  is  attended 
with  trouble,  delay,  expense  and  risk.  If,  on  the  contrary, 
there  are  bank  notes  current  in  both  places,  the  transmission 
of  these  by  the  post,  or  any  other  speedy  or  convenient  convey- 
ance, answers  the  purpose ;  and  these  again,  in  the  alternations 
of  demand,  are  frequently  returned  very  soon  after  to  the  place 
from  whence  they  were  first  sent :  whence  the  transportation 
and  retransportation  of  the  metals  are  obviated,  and  a  more 
convenient  and  more  expeditious  medium  of  payment  is  sub- 


APPENDIX  629 

stituted.  Nor  is  this  all :  the  metals,  instead  of  being  sus- 
pended from  their  usual  functions,  during  this  process  of  vibra- 
tion from  place  to  place,  continue  in  activity  and  administer 
still  to  the  ordinary  circulation,  which,  of  course,  is  prevented 
from  suffering  either  diminution  or  stagnation.  These  circum- 
stances are  additional  causes  of  what,  in  a  practical  sense,  or  to 
the  purposes  of  business,  may  be  called  greater  plenty  of 
money.  And  it  is  evident,  that  whatever  enhances  the  quan- 
tity of  circulating  money,  adds  to  the  ease  with  which  every 
industrious  member  of  the  community  may  acquire  that  portion 
of  it  of  which  he  stands  in  need,  and  enables  him  the  better 
to  pay  his  taxes  as  well,  as  to  supply  his  other  wants.  Eve*n 
where  the  circulation  of  the  bank  paper  is  not  general,  it  must 
still  have  the  same  effect,  though  in  a  less  degree  ;  for,  whatever 
furnishes  additional  supplies  to  the  channels  of  circulation  in 
one  quarter,  naturally  contributes  to  keep  the  streams  fuller 
elsewhere.  This  last  view  of  the  subject  serves  both  to  illus- 
trate the  position  that  banks  tend  to  facilitate  the  payment  of 
taxes,  and  to  exemplify  their  utility  to  business  of  every  kind 
in  which  money  is  an  agent. 

It  would  be  to  intrude  too  much  on  the  patience  of  the  house 
to  prolong  the  details  of  the  advantages  of  banks ;  especially 
as  all  those  which  might  still  be  particularized,  are  readily  to 
be  inferred  from  those  which  have  been  enumerated.  Their  dis- 
advantages, real  or  supposed,  are  now  to  be  reviewed.  The  most 
serious  of  the  charges  which  have  been  brought  against  them  are  : 

That  they  serve  to  increase  usury ; 

That  they  tend  to  prevent  other  kinds  of  lending ; 

That  they  furnish  temptations  to  overtrading ; 

That  they  afford  aid  to  ignorant  adventurers,  who  disturb  the 
natural  and  beneficial  course  of  trade  ; 

That  they  give  to  bankrupt  and  fraudulent  traders  a  fictitious 
credit,  which  enables  them  to  maintain  false  appearances,  and 
to  extend  their  impositions ;  and,  lastly, 

That  they  have  a  tendency  to  banish  gold  and  silver  from 
the  country. 

There  is  great  reason  to  believe  that,  on  a  close  and  candid 
survey,  it  will  be  discovered  that  these  charges  are  either  with- 
out foundation,  or  that,  as  far  as  the  evils  they  suggest  have 
been  found  to  exist,  they  have  proceeded  from  other,  or  partial, 
or  temporary  causes ;  are  not  inherent  in  the  nature  and  per- 
manent tendency  of  such  institutions  ;  or  are  more  than  coun- 
terbalanced by  opposite  advantages.  This  survey  shall  be  had, 
in  the  order  in  which  the  charges  have  been  stated.  The  first 
of  them  is — 


630  CONTEST  FOR  SOUND  MONEY 

That  banks  serve  to  increase  usury. 

It  is  a  truth,  which  ought  not  to  be  denied,  that  the  method 
of  conducting  business,  which  is  essential  to  bank  operations, 
has,  among  us,  in  particular  instances,  given  occasion  to  usuri- 
ous transactions.  The  punctuality  in  payments,  which  they 
necessarily  exact,  has  sometimes  obliged  those  who  have  ad- 
ventured beyond  both  their  capital  and  credit,  to  procure  money 
at  any  price,  and,  consequently,  to  resort  to  usurers  for  aid. 

But  experience  and  practice  gradually  bring  a  cure  to  this 
evil.  A  general  habit  of  punctuality  among  traders  is  the 
natural  consequence  of  the  necessity  of  observing  it  with  the 
bank  ;  a  circumstance  which,  itself,  more  than  compensates  for 
any  occasional  ill  which  may  have  sprung  from  that  necessity,  in 
the  particular  under  consideration.  As  far,  therefore,  as  traders 
depend  on  each  other  for  pecuniary  supplies,  they  can  calculate 
their  expectations  with  greater  certainty ;  and  are  in  propor- 
tionably  less  danger  of  disappointments,  which  might  compel 
them  to  have  recourse  to  so  pernicious  an  expedient  as  that  of 
borrowing  at  usury;  the  mischiefs  of  which,  after  a  few  ex- 
amples, naturally  inspire  great  care  in  all  but  men  of  desperate 
circumstances,  to  avoid  the  possibility  of  being  subjected  to 
them.  One,  and  not  the  least  of  the  evils  incident  to  the  use 
of  that  expedient,  if  the  fact  be  known,  or  even  strongly  sus- 
pected, is  loss  of  credit  with  the  bank  itself. 

The  directors  of  a  bank,  too,  though  in  order  to  extend  its 
business  and  its  popularity  in  the  infancy  of  an  institution,  they 
may  be  tempted  to  go  further  in  accommodation  than  the  strict 
rules  of  prudence  will  warrant,  grow  more  circumspect,  of 
course,  as  its  affairs  become  better  established,  and  as  the  evils 
of  too  great  facility  are  experimentally  demonstrated.  They 
become  more  attentive  to  the  situation  and  conduct  of  those 
with  whom  they  deal :  they  observe  more  narrowly  their  opera- 
tions and  pursuits ;  they  economize  the  credit  they  give  to 
those  of  suspicious  solidity ;  they  refuse  it  to  those  whose 
career  is  more  manifestly  hazardous.  In  a  word,  in  the  course 
of  practice,  from  the  very  nature  of  things,  the  interest  will 
make  it  the  policy  oi  a  bank  to  succor  the  wary  and  industrious  ; 
to  discredit  the  rash  and  unthrifty ;  to  discountenance  both  the 
usurious  lenders  and  the  usurious  borrowers. 

There  is  a  leading  view  in  which  the  tendency  of  banks  will 
be  seen  to  be  to  abridge  rather  than  to  promote  usury.  This 
relates  to  their  property  of  increasing  the  quantity  and  quicken- 
ing the  circulation  of  money.  If  it  be  evident  that  usury  will 
prevail  or  diminish,  according  to  the  proportion  which  the  de- 
mand for  borrowing  bears  to  the  quantity  of  money  at  market 


APPENDIX  63 1 

to  be  lent  —  whatever  has  the  property  just  mentioned,  whether 
it  be  in  the  shape  of  paper  or  coin,  by  contributing  to  render 
the  supply  more  equal  to  the  demand,  must  tend  to  counteract 
the  progress  of  usury. 

But  bank  lending,  it  is  pretended,  is  an  impediment  to  other 
kinds  of  lending ;  which,  by  confining  the  resource  of  borrow- 
ing to  a  particular  class,  leaves  the  rest  of  the  community  more 
destitute,  and  therefore  more  exposed  to  the  extortions  of 
usurers.  As  the  profits  of  bank  stock  exceed  the  legal  rate  of 
interest,  the  possessors  of  money,  it  is  argued,  prefer  investing 
it  in  that  article  to  lending  it  at  this  rate ;  to  which  there  are 
the  additional  motives  of  a  more  prompt  command  of  the  capi- 
tal and  of  more  frequent  and  exact  returns,  without  trouble  or 
perplexity  in  the  collection.  This  constitutes  the  second  charge 
which  has  been  enumerated. 

The  fact  on  which  this  charge  rests,  is  not  to  be  admitted 
without  several  qualifications,  particularly  in  reference  to  the 
state  of  things  in  this  country.  First.  The  great  bulk  of  the 
stock  of  a  bank  will  consist  of  the  funds  of  men  in  trade,  among 
ourselves,  and  moneyed  foreigners ;  the  former  of  whom  could 
not  spare  their  capitals  out  of  their  reach,  to  be  invested  in  loans 
for  long  periods,  on  mortgages  or  personal  security ;  and  the 
latter  of  whom  would  not  be  willing  to  be  subjected  to  the 
casualties,  delays  and  embarrassments  of  such  a  disposition  of 
their  money  in  a  distant  country.  Secondly.  There  will  always 
be  a  considerable  proportion  of  those  who  are  properly  the 
money  lenders  of  a  country,  who,  from  that  spirit  of  cau- 
tion which  usually  characterizes  this  description  of  men,  will  in- 
cline rather  to  vest  their  funds  in  mortgages  on  real  estate  than 
in  the  stock  of  a  bank,  which  they  are  apt  to  consider  as  a  more 
precarious  security. 

These  considerations  serve,  in  a  material  degree,  to  narrow 
the  foundation  of  the  objection,  as  to  the  point  of  fact.  But 
there  is  a  more  satisfactory  answer  to  it.  The  effect  supposed, 
as  far  as  it  has  existence,  is  temporary.  The  reverse  of  it  takes 
place  in  the  general  and  permanent  operation  of  the  thing. 

The  capital  of  every  public  bank  will,  of  course,  be  restricted 
within  a  certain  defined  limit.  It  is  the  province  of  legislative 
prudence  so  to  adjust  this  limit,  that  while  it  will  not  be  too 
contracted  for  the  demand  which  the  course  of  business  may 
create,  and  for  the  security  which  the  public  ought  to  have  for 
the  solidity  of  the  paper  which  may  be  issued  by  the  bank, 
it  will  still  be  within  the  compass  of  the  pecuniary  resources  of 
the  community ;  so  that  there  may  be  an  easy  practicability  of 
completing  the  subscriptions  to"  it.     When  this  is  once  done, 


632  CONTEST  FOR  SOUND  MONEY 

the  supposed  effect  of  necessity  ceases.  There  is  then  no 
longer  room  for  the  investment  of  any  additional  capital.  Stock 
may  indeed  change  hands,  by  one  person  selling  and  another 
buying ;  but  the  money  which  the  buyer  takes  out  of  the  com- 
mon mass  to  purchase  the  stock,  the  seller  receives  and  restores 
to  it.  Hence  the  future  surpluses  which  may  accumulate,  must 
take  their  natural  course  and  lending  at  interest  must  go  on  as 
if  there  were  no  such  institution. 

It  must,  indeed,  flow  in  a  more  copious  stream.  The  bank 
furnishes  an  extraordinary  supply  for  borrowers,  within  its  im- 
mediate sphere.  A  larger  supply  consequently  remains  for 
borrowers  elsewhere.  In  proportion  as  the  circulation  of  the 
bank  is  extended,  there  is  an  augmentation  of  the  aggregate 
mass  of  money  for  answering  the  aggregate  mass  of  demand. 
Hence  greater  facility  in  obtaining  it  for  every  purpose. 

It  ought  not  to  escape  without  a  remark,  that,  as  far  as  the 
citizens  of  other  countries  become  adventurers  in  the  bank, 
there  is  a  positive  increase  of  the  gold  and  silver  of  the  country. 
It  is  true  that  from  this  a  half  yearly  rent  is  drawn  back,  accru- 
ing from  the  dividends  upon  the  stock.  But  as  this  rent  arises 
from  the  employment  of  the  capital  by  our  own  citizens,  it  is 
probable  that  it  is  more  than  replaced  by  the  profits  of  that  em- 
ployment. It  is  also  likely  that  a  part  of  it  is,  in  the  course  of 
trade,  converted  into  the  products  of  our  country.  And  it  may 
even  prove  an  incentive,  in  some  cases,  to  emigration  to  a 
country  in  which  the  character  of  citizen  is  as  easy  to  be 
acquired,  as  it  is  estimable  and  important.  This  view  of  the 
subject  furnishes  an  answer  to  an  objection  which  has  been  de- 
duced from  the  circumstance  here  taken  notice  of,  namely,  the 
income  resulting  to  foreigners  from  the  part  of  the  stock  owned 
by  them,  which  has  been  represented  as  tending  to  drain  the 
country  of  its  specie.  In  this  objection,  the  original  invest- 
ment of  the  capital,  and  the  constant  use  of  it  afterwards, 
seem  both  to  have  been  overlooked. 

That  banks  furnish  temptations  to  overtrading,  is  the  third  of 
the  enumerated  objections.  This  must  mean  that,  by  affording 
additional  aids  to  mercantile  enterprise,  they  induce  the  mer- 
chant sometimes  to  adventure  beyond  the  prudent  or  salutary 
point.  But  the  very  statement  of  the  thing  shows  that  the  sub- 
ject of  the  charge  is  an  occasional  ill,  incident  to  a  general  good. 
Credit  of  every  kind  (as  a  species  of  which  only  can  bank  lend- 
ing have  the  effect  supposed)  must  be,  in  different  degrees, 
chargeable  with  the  same  inconvenience.  It  is  even  applicable 
to  gold  and  silver,  when  they  abound  in  circulation.  But  would 
it  be  wise  on  this  account  to  decry  the  precious  metals,  to  root 


APPENDIX  633 

out  credit,  or  to  proscribe  the  means  of  that  enterprise  which 
is  the  mainspring  of  trade  and  a  principal  source  of  national 
wealth,  because  it  now  and  then  runs  into  excesses,  of  which 
overtrading  is  one  ? 

If  the  abuses  of  a  beneficial  thing  are  to  determine  its  con- 
demnation, there  is  scarcely  a  source  of  public  prosperity  which 
will  not  speedily  be  closed.  In  every  case,  the  evil  is  to  be 
compared  with  the  good  ;  and  in  the  present  case,  such  a  com- 
parison will  issue  in  this,  that  the  new  and  increased  energies 
derived  to  commercial  enterprise  from  the  aid  of  banks,  are  a 
source  of  general  profit  and  advantage,  which  greatly  outweigh 
the  partial  ills  of  the  overtrading  of  a  few  individuals  at  partic- 
ular times,  or  of  numbers  in  particular  conjunctures. 

The  fourth  and  fifth  charges  may  be  considered  together. 
These  relate  to  the  aid  which  is  sometimes  afforded  by  banks 
to  unskilful  adventurers  and  fraudulent  traders.  These  charges 
also  have  some  degree  of  foundation,  though  far  less  than  has 
been  pretended ;  and  they  add  to  the  instances  of  partial  ills 
connected  with  more  extensive  and  overbalancing  benefits. 

The  practice  of  giving  fictitious  credit  to  improper  persons,  is 
one  of  those  evils  which  experience,  guided  by  interest,  speedily 
corrects.  The  bank  itself  is  in  so  much  jeopardy  of  being  a 
sufferer  by  it  that  it  has  the  strongest  of  all  inducements  to  be 
on  its  guard.  It  may  not  only  be  injured  immediately  by  the 
delinquencies  of  the  persons  to  whom  such  credit  is  given,  but 
eventually  by  the  incapacities  of  others,  whom  their  impositions 
or  failures  may  have  ruined. 

Nor  is  there  much  danger  of  a  bank's  being  betrayed  into 
this  error  from  want  of  information.  The  directors  themselves, 
being,  for  the  most  part,  selected  from  the  class  of  traders,  are  to 
be  expected  to  possess  individually  an  accurate  knowledge  of 
the  characters  and  situations  of  those  who  come  within  that 
description.  And  they  have,  in  addition  to  this,  the  course  of 
dealing  of  the  persons  themselves  with  the  bank,  to  assist  their 
judgment,  which  is  in  most  cases  a  good  index  of  the  state  in 
which  those  persons  are.  The  artifices  and  shifts  which  those 
in  desperate  or  declining  circumstances  are  obliged  to  employ, 
to  keep  up  the  countenance  which  the  rules  of  the  bank  require, 
and  the  train  of  their  connections,  are  so  many  prognostics  not 
difficult  to  be  interpreted,  of  the  fate  which  awaits  them.  Hence 
it  not  unfrequently  happens  that  banks  are  the  first  to  discover 
the  unsoundness  of  such  characters,  and,  by  withholding  credit, 
to  announce  to  the  public  that  they  are  not  entitled  to  it. 

If  banks,  in  spite  of  every  precaution,  are  sometimes  betrayed 
into  giving  a  false  credit  to  the  persons  described,  they  more 


634  CONTEST  FOR  SOUND  MONEY 

frequently  enable  honest  and  industrious  men  of  small  or  per- 
haps of  no  capital,  to  undertake  and  prosecute  business  with 
advantage  to  themselves  and  to  the  community  ;  and  assist  mer- 
chants of  both  capital  and  credit,  who  meet  with  fortuitous  and 
unforeseen  shocks  which  might,  without  such  helps,  prove  fatal 
to  them  and  to  others,  to  make  head  against  their  misfortunes 
and  finally  to  retrieve  their  affairs  ;  circumstances  which  form  no 
inconsiderable  encomium  on  the  utility  of  banks. 

But  the  last  and  heaviest  charge  is  still  to  be  examined  :  this 
is,  that  banks  tend  to  banish  the  gold  and  silver  of  the  country. 

The  force  of  this  objection  rests  upon  their  being  an  engine 
of  paper  credit,  which,  by  furnishing  a  substitute  for  the  metals, 
is  supposed  to  promote  their  exportation.  It  is  an  objection 
which,  if  it  has  any  foundation,  lies  not  against  banks  peculiarly 
but  against  every  species  of  paper  credit. 

The  most  common  answer  given  to  it  is  that  the  thing  sup- 
posed is  of  little  or  no  consequence  ;  that  it  is  immaterial  what 
serves  the  purpose  of  money,  whether  paper  or  gold  or  silver ; 
that  the  effect  of  both  upon  industry  is  the  same ;  and  that  the 
intrinsic  wealth  of  a  nation  is  to  be  measured  not  by  the  abun- 
dance of  the  precious  metals  contained  in  it,  but  by  the  quan- 
tity of  the  productions  of  its  labor  and  industry. 

This  answer  is  not  destitute  of  solidity,  though  not  entirely 
satisfactory.  It  is  certain  that  the  vivification  of  industry,  by  a 
full  circulation,  with  the  aid  of  a  proper  and  well  regulated 
paper  credit,  may  more  than  compensate  for  the  loss  of  a  part 
of  the  gold  and  silver  of  a  nation,  if  the  consequence  of  avoid- 
ing that  loss  should  be  a  scanty  or  defective  circulation. 

But  the  positive  and  permanent  increase  or  decrease  of  the 
precious  metals  in  a  country  can  hardly  ever  be  a  matter  of 
indifference.  As  the  commodity  taken  in  lieu  of  every  other,  it 
is  a  species  of  the  most  effective  wealth ;  and  as  the  money  of 
the  world,  it  is  of  great  concern  to  the  State  that  it  possess  a 
sufficiency  of  it  to  face  any  demands  which  the  protection  of 
its  external  interests  may  create. 

The  objection  seems  to  admit  of  another  and  more  conclu- 
sive answer,  which  controverts  the  fact  itself.  A  nation  that  has 
no  mines  of  its  own  must  derive  the  precious  metals  from  oth- 
ers, generally  speaking,  in  exchange  for  the  products  of  its  labor 
and  industry.  The  quantity  it  will  possess  will,  therefore,  in 
the  ordinary  course  of  things,  be  regulated  by  the  favorable  or 
unfavorable  balance  of  its  trade ;  that  is,  by  the  proportion 
between  its  abilities  to  supply  foreigners  and  its  wants  of  them  ; 
between  the  amount  of  its  exportations  and  that  of  its  importa- 
tions.    Hence,  the  state  of  its  agriculture  and  manufactures, 


APPENDIX  635 

the  quantity  and  quality  of  its  labor  and  industry  must,  in  the 
main,  influence  and  determine  the  increase  or  decrease  of  its 
gold  and  silver.  If  this  be  true,  the  inference  seems  to  be,  that 
well  constituted  banks  favor  the  increase  of  the  precious  metals. 
It  has  been  shown  that  they  augment,  in  different  ways,  the 
active  capital  of  a  country.  This  it  is  which  generates  employ- 
ment ;  which  animates  and  expands  labor  and  industry.  Every 
addition  which  is  made  to  it,  by  contributing  to  put  in  motion 
a  greater  quantity  of  both,  tends  to  create  a  greater  quantity 
of  the  products  of  both ;  and,  by  furnishing  more  materials  for 
exportation,  conduces  to  a  favorable  balance  of  trade  and  con- 
sequently, to  the  introduction  and  increase  of  gold  and  silver. 
This  conclusion  appears  to  be  drawn  from  solid  premises. 
There  are,  however,  objections  to  be  made  to  it. 

It  may  be  said,  that,  as  bank  paper  affords  a  substitute  for 
specie,  it  serves  to  counteract  that  rigorous  necessity  for  the 
metals,  as  a  medium  of  circulation,  which,  in  the  case  of  a  wrong 
balance,  might  restrain,  in  some  degree,  their  exportation  ;  and 
it  may  be  added  that,  from  the  same  cause,  in  the  same  case, 
it  would  retard  those  economical  and  parsimonious  reforms  in 
the  manner  of  living,  which  the  scarcity  of  money  is  calculated 
to  produce,  and  which  might  be  necessary  to  rectify  such  wrong 
balance. 

There  is,  perhaps,  some  truth  in  both  these  observations  ;  but 
they  appear  to  be  of  a  nature  rather  to  form  exceptions  to  the 
generality  of  the  conclusion,  than  to  overthrow  it.  The  state  of 
things  in  which  the  absolute  exigencies  of  circulation  can  be  sup- 
posed to  resist,  with  any  effect,  the  urgent  demands  for  specie 
which  a  wrong  balance  of  trade  may  occasion,  presents  an  ex>- 
treme  case.  And  a  situation  in  which  a  too  expensive  manner 
of  living  of  a  community,  compared  with  its  means,  can  stand 
in  need  of  a  corrective,  from  distress  or  necessity,  is  one  which, 
perhaps,  rarely  results  but  from  extraordinary  and  adventitious 
causes  :  such,  for  example,  as  a  national  revolution,  which  un- 
settles all  the  established  habits  of  a  people,  and  inflames  the 
appetite  for  extravagance,  by  the  illusions  of  an  ideal  wealth, 
engendered  by  the  continual  multiplication  of  a  depreciating 
currency,  or  some  similar  cause.  There  is  good  reason  to  be- 
lieve that,  where  the  laws  are  wise  and  well  executed,  and  the 
inviolability  of  property  and  contracts  maintained,  the  economy 
of  a  people  will,  in  the  general  course  of  things,  correspond 
with  its  means. 

The  support  of  industry  is,  probably,  in  every  case,  of  more 
consequence  towards  correcting  a  wrong  balance  of  trade  than 
any  practicable  retrenchment  in  the  expenses  of  families  or  in- 


636  CONTEST  FOR  SOUND  MONEY 

dividuals ;  and  the  stagnation  of  it  would  be  likely  to  have  more 
effect  in  prolonging,  than  any  such  savings  in  shortening,  its 
continuance.  That  stagnation  is  a  natural  consequence  of  an 
inadequate  medium,  which,  without  the  aid  of  bank  circulation, 
would,  in  the  cases  supposed,  be  severely  felt. 

It  also  deserves  notice  that,  as  the  circulation  of  a  bank  is 
always  in  a  compound  ratio  to  the  fund  upon  which  it  depends, 
and  to  the  demand  for  it,  and  as  that  fund  is  itself  affected  by 
the  exportation  of  the  metals,  there  is  no  danger  of  its  being 
overstocked,  as  in  the  case  of  paper  issued  at  the  pleasure  of 
the  Government,  or  of  its  preventing  the  consequences  of  any 
unfavorable  balance  from  being  sufficiently  felt  to  produce  the 
reforms  alluded  to,  as  far  as  circumstances  may  require  and 
admit. 

Nothing  can  be  more  fallible  than  the  comparisons  which 
have  been  made  between  different  countries  to  illustrate  the 
truth  of  the  position  under  consideration.  The  comparative 
quantity  of  gold  and  silver  in  different  countries  depends  upon 
an  infinite  variety  of  facts  and  combinations,  all  of  which  ought 
to  be  known  in  order  to  judge  whether  the  existence  or  non- 
existence of  paper  currencies  has  any  share  in  the  relative  pro- 
portions they  contain.  The  mass  and  value  of  the  productions 
of  the  labor  and  industry  of  each,  compared  with  its  wants ; 
the  nature  of  its  establishments  abroad ;  the  kind  of  wars  in 
which  it  is  usually  engaged ;  the  relations  it  bears  to  the  coun- 
tries which  are  the  original  possessors  of  those  metals ;  the 
privileges  it  enjoys  in  their  trade ;  these,  and  a  number  of 
other  circumstances,  are  all  to  be  taken  into  the  account,  and 
render  the  investigation  too  complex  to  justify  any  reliance  on 
the  vague  and  general  surmises  which  have  been  hitherto  haz- 
arded on  the  point. 

In  the  foregoing  discussion,  the  objection  has  been  considered 
as  applying  to  the  permanent  expulsion  and  diminution  of  the 
metals.  Their  temporary  exportation,  for  particular  purposes, 
has  not  been  contemplated.  This,  it  must  be  confessed,  is 
facilitated  by  banks,  from  the  faculty  banks  possess  of  supply- 
ing their  place.  But  their  utility  is  in  nothing  more  conspicu- 
ous than  in  these  very  cases.  They  enable  the  government  to 
pay  its  foreign  debts,  and  to  answer  any  exigencies  which  the 
external  concern  of  the  community  may  have  produced.  They 
enable  the  merchant  to  support  his  credit,  (on  which  the  pros- 
perity of  trade  depends,)  when  special  circumstances  prevent 
remittances  in  other  modes.  They  enable  him  also  to  prosecute 
enterprises  which  ultimately  tend  to  an  augmentation  of  the 
species  of  wealth  in  question.     It  is  evident  that  gold  and  silver 


APPENDIX  637 

may  often  be  employed  in  procuring  commodities  abroad, 
which,  in  a  circuitous  commerce,  replace  the  original  fund,  with 
considerable  addition.  But  it  is  not  to  be  inferred,  from  this 
facility  given  to  temporary  exportation,  that  banks,  which  are  so 
friendly  to  trade  and  industry,  are,  in  their  general  tendency 
inimical  to  the  increase  of  the  precious  metals. 

These  several  views  of  the  subject  appear  sufficient  to  impress 
a  full  conviction  of  the  utility  of  banks,  and  to  demonstrate 
that  they  are  of  great  importance,  not  only  in  relation  to  the 
administration  of  the  finances,  but  in  the  general  system  of 
the  political  economy. 

The  judgment  of  many  concerning  them  has,  no  doubt,  been 
perplexed  by  the  misinterpretation  of  appearances  which  were 
to  be  ascribed  to  other  causes.  The  general  devastation  of  per- 
sonal property,  occasioned  by  the  late  war,  naturally  produced, 
on  the  one  hand,  a  great  demand  for  money,  and,  on  the  other, 
a  great  deficiency  of  it  to  answer  the  demand.  Some  injudicious 
laws,  which  grew  out  of  the  public  distresses,  by  impairing  con- 
fidence, and  causing  a  part  of  the  inadequate  sum  in  the  coun- 
try to  be  locked  up,  aggravated  the  evil.  The  dissipated  habits 
contracted  by  many  individuals  during  the  war,  which,  after  the 
peace,  plunged  them  into  expenses  beyond  their  incomes  ;  the 
number  of  adventurers  without  capital,  and,  in  many  instances, 
without  information,  who  at  that  epoch  rushed  into  trade,  and 
were  obliged  to  make  any  sacrifices  to  support  a  transient  credit ; 
the  employment  of  considerable  sums  in  speculations  upon  the 
public  debt,  which,  from  its  unsettled  state,  was  incapable  of  be- 
coming itself  a  substitute ;  all  these  circumstances  concurring, 
necessarily  led  to  usurious  borrowing,  produced  most  of  the 
inconveniences,  and  were  the  true  cause  of  most  of  the  appear- 
ances, which,  where  banks  were  established,  have  been  by  some 
erroneously  placed  to  their  account :  a  mistake  which  they  might 
easily  have  avoided  by  turning  their  eyes  towards  places  where 
there  were  none,  and  where,  nevertheless,  the  same  evils  would 
have  been  perceived  to  exist,  even  in  a  greater  degree  than 
where  those  institutions  had  obtained. 

These  evils  have  either  ceased  or  been  greatly  mitigated. 
Their  more  complete  extinction  may  be  looked  for  from  that 
additional  security  to  property  which  the  constitution  of  the 
United  States  happily  gives  ;  (a  circumstance  of  prodigious 
moment  in  the  scale,  both  of  public  and  private  prosperity ;) 
from  the  attraction  of  foreign  capital,  under  the  auspices  of 
that  security,  to  be  employed  upon  objects,  and  in  enterprises, 
for  which  the  state  of  this  country  opens  a  wide  and  inviting 
field ;  from  the  consistency  and  stability  which  the  public  debt 


638  CONTEST  FOR  SOUND  MONEY 

is  fast  acquiring,  as  well  in  the  public  opinion  at  home  and 
abroad,  as,  in  fact,  from  the  augmentation  of  capital  which  that 
circumstance  and  the  quarter-yearly  payment  of  interest  will 
afford ;  and  from  the  more  copious  circulation  which  will  be 
likely  to  be  created  by  a  well  constituted  national  bank. 

The  establishment  of  banks  in  this  country  seems  to  be 
recommended  by  reasons  of  a  peculiar  nature.  Previously  to 
the  Revolution,  circulation  was  in  a  great  measure  carried  on  by 
paper  emitted  by  the  several  local  governments.  In  Pennsyl- 
vania alone,  the  quantity  of  it  was  near  a  million  and  a  half 
of  dollars.  This  auxiliary  may  be  said  to  be  now  at  an  end. 
And  it  is  generally  supposed  that  there  has  been,  for  some  time 
past,  a  deficiency  of  circulating  medium.  How  far  that 
deficiency  is  to  be  considered  as  real  or  imaginary,  is  not  sus- 
ceptible of  demonstration  ;  but  there  are  circumstances  and 
appearances,  which,  in  relation  to  the  country  at  large,  coun- 
tenance the  supposition  of  its  reality. 

The  circumstances  are,  besides  the  fact  just  mentioned 
respecting  paper  emissions,  the  vast  tracts  of  waste  land,  and 
the  little  advanced  state  of  manufactures.  The  progressive 
settlement  of  the  former,  while  it  promises  ample  retribution  in 
the  generation  of  future  resources,  diminishes  or  obstructs,  in 
the  mean  time,  the  active  wealth  of  the  country.  It  not  only 
draws  off  a  part  of  the  circulating  money,  and  places  it  in  a 
more  passive  state,  but  it  diverts,  into  its  own  channels,  a 
portion  of  that  species  of  labor  and  industry  which  would 
otherwise  be  employed  in  furnishing  materials  for  foreign 
trade,  and  which,  by  contributing  to  a  favorable  balance,  would 
assist  the  introduction  of  specie.  In  the  early  periods  of  new 
settlements,  the  settlers  not  only  furnish  no  surplus  for  exporta- 
tion, but  they  consume  a  part  of  that  which  is  produced  by 
the  labor  of  others.  The  same  thing  is  a  cause  that  manufac- 
tures do  not  advance,  or  advance  slowly.  And  notwithstanding 
some  hypotheses  to  the  contrary,  there  are  many  things  to  in- 
duce a  suspicion  that  the  precious  metals  will  not  abound  in 
any  country  which  has  not  mines,  or  variety  of  manufactures. 
They  have  been  sometimes  acquired  by  the  sword  ;  but  the 
modern  system  of  war  has  expelled  this  resource,  and  it  is  one 
upon  which  it  is  to  be  hoped  the  United  States  will  never  be 
inclined  to  rely. 

The  appearances  alluded  to,  are,  greater  prevalency  of 
direct  barter  in  the  more  interior  districts  of  the  country  — 
which,  however,  has  been  for  some  time  past  gradually  lessen- 
ing ;  and  greater  difficulty,  generally,  in  the  advantageous 
alienation  of  improved   real   estate ;  which,  also,  has   of  late 


APPENDIX  639 

diminished,  but  is  still  seriously  felt  in  different  parts  of  the 
Union.  The  difficulty  of  getting  money,  which  has  been  a 
general  complaint,  is  not  added  to  the  number ;  because  it  is 
the  complaint  of  all  times,  and  one  in  which  imagination  must 
ever  have  too  great  scope  to  permit  an  appeal  to  it. 

If  the  supposition  of  such  a  deficiency  be  in  any  degree 
founded,  and  some  aid  to  circulation  be  desirable,  it  remains  to 
inquire  what  ought  to  be  the  nature  of  that  aid. 

The  emitting  of  paper  money  by  the  authority  of  Govern- 
ment is  wisely  prohibited  to  the  individual  States  by  the 
national  constitution ;  and  the  spirit  of  that  prohibition  ought 
not  to  be  disregarded  by  the  Government  of  the  United  States. 
Though  paper  emissions,  under  a  general  authority,  might 
have  some  advantages  not  applicable,  and  be  free  from  some 
disadvantages  which  are  applicable,  to  the  like  emissions  by 
the  States,  separately,  yet  they  are  of  a  nature  so  liable  to 
abuse  —  and,  it  may  even  be  affirmed,  so  certain  of  being 
abused  —  that  the  wisdom  of  the  Government,  will  be  shown 
in  never  trusting  itself  with  the  use  of  so  seducing  and 
dangerous  an  expedient.  In  times  of  tranquillity,  it  might 
have  no  ill  consequence  ;  it  might  even  perhaps  be  managed  in 
a  way  to  be  productive  of  good :  but  in  great  and  trying 
emergencies,  there  is  almost  a  moral  certainty  of  its  becoming 
mischievous.  The  stamping  of  paper  is  an  operation  so  much 
easier  than  the  laying  of  taxes,  that  a  Government,  in  the 
practice  of  paper  emissions,  would  rarely  fail,  in  any  such 
emergency,  to  indulge  itself  too  far  in  the  employment  of  that 
resource,  to  avoid  as  much  as  possible  one  less  auspicious  to 
present  popularity.  If  it  should  not  even  be  carried  so  far  as 
to  be  rendered  an  absolute  bubble,  it  would  at  least  be  likely 
to  be  extended  to  a  degree  which  would  occasion  an  inflated 
and  artificial  state  of  things,  incompatible  with  the  regular  and 
prosperous  course  of  the  political  economy. 

Among  other  material  differences  between  a  paper  currency, 
issued  by  the  mere  authority  of  Government,  and  one  issued 
by  a  bank,  payable  in  coin,  is  this  :  that,  in  the  first  case,  there 
is  no  standard  to  which  an  appeal  can  be  made,  as  to  the 
quantity  which  will  only  satisfy,  or  which  will  surcharge,  the 
circulation  ;  in  the  last,  that  standard  results  from  the  demand. 
If  more  should  be  issued  than  is  necessary,  it  will  return  upon 
the  bank.  Its  emissions,  as  elsewhere  intimated,  must  always 
be  in  a  compound  ratio  to  the  fund  and  the  demand  :  whence 
it  is  evident,  that  there  is  a  limitation  in  the  nature  of  the  thing ; 
while  the  discretion  of  the  Government  is  the  only  measure  of 
the  extent  of  the  emissions  by  its  own  authority. 


64O  CONTEST  FOR  SOUND  MONEY 

This  consideration  further  illustrates  the  danger  of  emissions 
of  that  sort,  and  the  preference  which  is  due  to  bank  paper. 

The  payment  of  the  interest  of  the  public  debt  at  thirteen 
different  places,  is  a  weighty  reason,  peculiar  to  our  immediate 
situation,  for  desiring  a  bank  circulation.  Without  a  paper,  in 
general  currency,  equivalent  to  gold  and  silver,  a  considerable 
proportion  of  the  specie  of  the  country  must  always  be  suspended 
from  circulation,  and  left  to  accumulate,  preparatorily  to  each 
day  of  payment ;  and  as  often  as  one  approaches,  there  must 
be  in  several  cases  an  actual  transportation  of  the  metals,  at 
both  expense  and  risk,  from  their  natural  and  proper  reservoirs, 
to  distant  places.  This  necessity  will  be  felt  very  injuriously  to 
the  trade  of  some  of  the  States  ;  and  will  embarrass,  not  a  little, 
the  operations  of  the  Treasury  in  those  States.  It  will  also  ob- 
struct those  negotiations  between  different  parts  of  the  Union, 
by  the  instrumentality  of  Treasury  bills,  which  have  already 
afforded  valuable  accommodations  to  trade  in  general. 

Assuming  it,  then,  as  a  consequence,  from  what  has  been  said, 
that  a  national  bank  is  a  desirable  institution,  two  inquiries 
emerge :  Is  there  no  such  institution,  already  in  being,  which 
has  a  claim  to  that  character,  and  which  supersedes  the  pro- 
priety or  necessity  of  another?  If  there  be  none,  what  are  the 
principles  upon  which  one  ought  to  be  established  ? 

There  are  at  present  three  banks  in  the  United  States  :  That 
of  North  America,  established  in  the  City  of  Philadelphia  ;  that 
of  New  York,  established  in  the  City  of  New  York ;  that  of 
Massachusetts,  established  in  the  town  of  Boston.  Of  these 
three,  the  first  is  the  only  one  which  has  at  any  time  had  a 
direct  relation  to  the  Government  of  the  United  States. 

The  Bank  of  North  America  originated  in  a  resolution  of 
Congress  of  the  26th  of  May,  1781,  founded  upon  a  proposition 
of  the  Superintendent  of  Finance,  which  was  afterwards  carried 
into  execution  by  an  Ordinance  of  the  31st  of  December  follow- 
ing, entitled  "  An  Ordinance  to  Incorporate  the  subscribers  to 
the  Bank  of  North  America." 

The  aid  afforded  to  the  United  States  by  this  institution,  dur- 
ing the  remaining  period  of  the  war,  was  of  essential  conse- 
quence ;  and  its  conduct  towards  them,  since  the  peace,  has 
not  weakened  its  title  to  their  patronage  and  favor.  So  far,  its 
pretensions  to  the  character  in  question  are  respectable ;  but 
there  are  circumstances  which  militate  against  them  and  con- 
siderations which  indicate  the  propriety  of  an  establishment  on 
different  principles. 

The  directors  of  this  bank,  on  behalf  of  their  constituents, 
have  since  accepted  and  acted  on  the  new  charter  from  the  State 


APPENDIX  641 

of  Pennsylvania,  materially  variant  from  their  original  one,  and 
which  so  narrows  the  foundation  of  the  institution,  as  to  render 
it  an  incompetent  basis  for  the  extensive  purposes  of  a  national 
bank. 

The  limit  assigned  by  the  ordinance  of  Congress  to  the  stock 
of  the  bank,  is  ten  millions  of  dollars.  The  last  charter  of 
Pennsylvania  confines  it  to  two  millions.  Questions  naturally 
arise,  whether  there  be  not  a  direct  repugnancy  between  two 
charters  so  differently  circumstanced  ?  And  whether  the  ac- 
ceptance of  the  one,  is  not  to  be  deemed  a  virtual  surrender  of 
the  other  ?  But  perhaps  it  is  neither  advisable  nor  necessary  to 
attempt  a  solution  of  them. 

There  is  nothing  in  the  acts  of  Congress,  which  imply  an  ex- 
clusive right  in  the  institution  to  which  they  relate,  except 
during  the  term  of  war.  There  is,  therefore,  nothing,  if  the 
public  good  require  it,  which  prevents  the  establishment  of 
another.  It  may,  however,  be  incidentally  remarked,  that  in 
the  general  opinion  of  the  citizens  of  the  United  States,  the 
Bank  of  North  America  has  taken  the  station  of  a  bank  of  Penn- 
sylvania only.  This  is  a  strong  argument  for  a  new  institution, 
or  for  a  renovation  of  the  old,  to  restore  it  to  the  situation  in 
which  it  originally  stood  in  the  view  of  the  United  States. 

But,  though  the  ordinance  of  Congress  contains  no  grant  of 
exclusive  privileges,  there  may  be  room  to  allege  that  the  Gov- 
ernment of  the  United  States  ought  not,  in  point  of  candor  and 
equity,  to  establish  any  rival  or  interfering  institution,  in  prej- 
udice of  the  one  already  established  ;  especially  as  this  has,  from 
services  rendered,  well-founded  claims  to  protection  and  regard. 

The  justice  of  such  an  observation  ought,  within  proper 
bounds,  to  be  admitted.  A  new  establishment  of  the  sort 
ought  not  to  be  made  without  cogent  and  sincere  reasons  of 
public  good.  And,  in  the  manner  of  doing  it,  every  facility 
should  be  given  to  a  consolidation  of  the  old  with  the  new, 
upon  terms  not  injurious  to  the  parties  concerned.  But  there 
is  no  ground  to  maintain,  that,  in  a  case  in  which  the  Govern- 
ment has  made  no  condition  restricting  its  authority,  it  ought 
voluntarily  to  restrict  it,  through  regard  to  the  interests  of  a 
particular  institution,  when  those  of  the  States  dictate  a  differ- 
ent course ;  especially,  too,  after  such  circumstances  have  in- 
tervened, as  characterise  the  actual  situation  of  the  Bank  of 
North  America. 

The  inducements  to  a  new  disposition  of  the  thing  are  now 
to  be  considered.  The  first  of  them  which  occurs,  is,  the  at 
least  ambiguous  situation  in  which  the  Bank  of  North  America 
has  placed  itself,  by  the  acceptance  of  its  last  charter.     If  this 


642  CONTEST  FOR  SOUND  MONEY 

has  rendered  it  the  mere  bank  of  a  particular  state,  liable  to 
dissolution  at  the  expiration  of  fourteen  years,  (to  which  term 
the  act  of  that  state  has  restricted  its  duration,)  it  would  be 
neither  fit  nor  expedient  to  accept  it  as  an  equivalent  for  a 
Bank  of  the  United  States. 

The  restriction  of  its  capital  also,  which,  according  to  the 
same  supposition,  cannot  be  extended  beyond  two  millions  of 
dollars,  is  a  conclusive  reason  for  a  different  establishment.  So 
small  a  capital  promises  neither  the  requisite  aid  to  Govern- 
ment, nor  the  requisite  security  to  the  community.  It  may 
answer  very  well  the  purposes  of  local  accommodation,  but 
is  an  inadequate  foundation  for  a  circulation  co-extensive  with 
the  United  States,  embracing  the  whole  of  their  revenues, 
and  affecting  every  individual  into  whose  hands  the  paper  may 
come. 

And,  inadequate  as  such  a  capital  would  be  to  the  essential 
ends  of  a  national  bank,  it  is  liable  to  be  rendered  still  more  so, 
by  that  principle  of  the  constitution  of  the  Bank  of  North 
America,  contained  equally  in  its  old  and  in  its  new  charter, 
which  leaves  the  increase  of  the  actual  capital  at  any  time  (now 
far  short  of  the  allowed  extent)  to  the  discretion  of  the  direc- 
tors or  stockholders.  It  is  naturally  to  be  expected  that  the 
allurements  of  an  advanced  price  of  stock,  and  of  large  divi- 
dends, may  disincline  those  who  are  interested  to  an  extension 
of  capital,  from  which  they  will  be  apt  to  fear  a  diminution  of 
profits.  And  from  this  circumstance,  the  interest  and  accom- 
modation of  the  public,  as  well  individually  as  collectively,  are 
made  more  subordinate  to  the  interest,  real  or  imagined,  of  the 
stockholders,  than  they  ought  to  be.  It  is  true  that,  unless  the 
latter  be  consulted,  there  can  be  no  bank,  (in  the  sense  at  least 
in  which  institutions  of  this  kind,  worthy  of  confidence,  can  be 
established  in  this  country ;)  but  it  does  not  follow  that  this  is 
alone  to  be  consulted,  or  that  it  even  ought  to  be  paramount. 
Public  utility  is  more  truly  the  object  of  public  banks,  than 
private  profit.  And  it  is  the  business  of  Government  to  con- 
stitute them  on  such  principles,  that  while  the  latter  will  result 
in  a  sufficient  degree  to  afford  competent  motives  to  engage  in 
them,  the  former  be  not  made  subservient  to  it.  To  effect  this,  a 
principal  object  of  attention  ought  to  be  to  give  free  scope  to 
the  creation  of  an  ample  capital ;  and  with  this  view,  fixing  the 
bounds  which  are  deemed  .safe  and  convenient,  to  leave  no  dis- 
cretion either  to  stop  short  of  them,  or  to  overpass  them.  The 
want  of  this  precaution,  in  the  establishment  of  the  Bank  of 
North  America,  is  a  further  and  an  important  reason  for  desiring 
one  differently  constituted. 


APPENDIX  643 

There  may  be  room  at  first  sight  for  a  supposition,  that,  as 
the  profits  of  a  bank  will  bear  a  proportion  to  the  extent  of  its 
operations,  and  as  for  this  reason  the  interest  of  the  stock- 
holders will  not  be  disadvantageously  affected  by  any  necessary 
augmentations  of  capital,  there  is  no  cause  to  apprehend  that 
they  will  be  indisposed  to  such  augmentations.  But  most  men, 
in  matters  of  this  nature,  prefer  the  certainties  they  enjoy  to 
probabilities  depending  on  untried  experiments ;  especially 
when  these  promise  rather  that  they  will  not  be  injured,  than 
that  they  will  be  benefited. 

From  the  influence  of  this  principle,  and  a  desire  of  enhanc- 
ing its  profits,  the  directors  of  a  bank  will  be  more  apt  to  over- 
strain its  faculties,  in  an  attempt  to  face  the  additional  demands 
which  the  course  of  business  may  create,  than  to  set  on  foot  new 
subscriptions  which  may  hazard  a  diminution  of  the  profits,  and 
even  a  temporary  reduction  of  the  price  of  stock. 

Banks  are  among  the  best  expedients  for  lowering  the  rate  of 
interest  in  a  country ;  but,  to  have  this  effect,  their  capitals  must 
be  completely  equal  to  all  the  demands  of  business,  and  such 
as  will  tend  to  remove  the  idea  that  the  accommodations  they 
afford  are  in  any  degree  favors  ;  an  idea  very  apt  to  accompany 
the  parsimonious  dispensation  of  contracted  funds.  In  this,  as 
in  every  other  case,  the  plenty  of  the  commodity  ought  to  beget 
a  moderation  of  the  price. 

The  want  of  a  principle  of  rotation  in  the  constitution  of  the 
Bank  of  North  America,  is  another  argument  for  a  variation  of 
the  establishment.  Scarcely  one  of  the  reasons  which  militate 
against  this  principle  in  the  constitution  of  a  country,  is  appli- 
cable to  that  of  a  bank ;  while  there  are  strong  reasons  in  favor 
of  it,  in  relation  to  the  one,  which  do  not  apply  to  the  other. 
The  knowledge  to  be  derived  from  experience  is  the  only  cir- 
cumstance common  to  both,  which  pleads  against  rotation  in 
the  directing  officers  of  a  bank. 

But  the  objects  of  the  government  of  a  nation,  and  those  of 
the  government  of  a  bank,  are  so  widely  different,  as  greatly  to 
weaken  the  force  of  that  consideration  in  reference  to  the  latter. 
Almost  every  important  case  of  legislation  requires,  towards  a 
right  decision,  a  general  and  accurate  acquaintance  with  the 
affairs  of  the  State,  and  habits  of  thinking  seldom  acquired  but 
from  a  familiarity  with  public  concerns.  The  administration  of 
a  bank,  on  the  contrary,  is  regulated  by  a  few  simple  fixed 
maxims,  the  application  of  which  is  not  difficult  to  any  man  of 
judgment,  especially  if  instructed  in  the  principles  of  trade.  It 
is,  in  general,  a  constant  succession  of  the  same  details. 

But,  though  this  be  the  case,  the  idea  of  the  advantages  of 


644  CONTEST  FOR  SOUND  MONEY 

experience  is  not  to  be  slighted.  Room  ought  to  be  left  for  the 
regular  transmission  of  official  information  ;  and  for  this  purpose, 
the  head  of  the  direction  ought  to  be  excepted  from  the  prin- 
ciple of  rotation.  With  this  exception,  and  with  the  aid  of*  the 
information  of  the  subordinate  officers,  there  can  be  no  danger 
of  any  ill  effects  from  want  of  experience  or  knowledge  ;  espe- 
cially as  the  periodical  exclusion  ought  not  to  reach  the  whole 
of  the  directors  at  one  time. 

The  argument  in  favor  of  the  principle  of  rotation  is  this : 
that,  by  lessening  the  danger  of  combinations  among  the  direc- 
tors, to  make  the  institution  subservient  to  party  views,  or  to  the 
accommodation,  preferably,  of  any  particular  set  of  men,  it  will 
render  the  public  confidence  more  firm,  stable,  and  unqualified. 

When  it  is  considered  that  the  directors  of  a  bank  are  not 
elected  by  the  great  body  of  the  community,  in  which  a  diver- 
sity of  views  will  naturally  prevail  at  different  conjunctures,  but 
by  a  small  and  select  class  of  men,  among  whom  it  is  far  more 
easy  to  cultivate  a  steady  adherence  to  the  same  persons  and 
objects,  and  that  those  directors  have  it  in  their  power  so  im- 
mediately to  conciliate,  by  obliging  the  most  influential  of  this 
class,  it  is  easy  to  perceive  that,  without  the  principle  of  rota- 
tion, changes  in  that  body  can  rarely  happen,  but  as  a  conces- 
sion which  they  may  themselves  think  it  expedient  to  make  to 
public  opinion. 

The  continual  administration  of  an  institution  of  this  kind, 
by  the  same  persons,  will  never  fail,  with  or  without  cause, 
from  their  conduct,  to  excite  distrust  and  discontent.  The 
necessary  secrecy  of  their  transactions  gives  unlimited  scope  to 
imagination  to  infer  that  something  is  or  may  be  wrong  And 
this  inevitable  mystery  is  a  solid  reason  for  inserting  in  the 
constitution  of  a  bank  the  necessity  of  a  change  of  men.  As 
neither  the  mass  of  the  parties  interested,  nor  the  public  in 
general,  can  be  permitted  to  be  witnesses  of  the  interior 
management  of  the  directors,  it  is  reasonable  that  both  should 
have  that  check  upon  their  conduct,  and  that  security  against 
the  prevalency  of  a  partial  or  pernicious  system,  which  will  be 
produced  by  the  certainty  of  periodical  changes.  Such,  too, 
is  the  delicacy  of  the  credit  of  a  bank,  that  everything  which 
can  fortify  confidence  and  repel  suspicion,  without  injuring  its 
operations,  ought  carefully  to  be  sought  after  in  its  formation. 

A  further  consideration  in  favor  of  a  change,  is  the  improper 
rule  by  which  the  right  of  voting  for  directors  is  regulated  in 
the  plan  upon  which  the  Bank  of  North  America  was  originally 
constituted,  namely,  a  vote  for  each  share,  and  the  want  of  a 
rule  in  the  last  charter ;  unless  the  silence  of  it,  on  that  point, 


APPENDIX  645 

may  signify  that  every  stockholder  is  to  have  an  equal  and  a 
single  vote,  which  would  be  a  rule  in  a  different  extreme  not 
less  erroneous.  It  is  of  importance  that  a  rule  should  be 
established  on  this  head,  as  it  is  one  of  those  things  which 
ought  not  to  be  left  to  discretion ;  and  it  is,  consequently,  of 
equal  importance  that  the  rule  should  be  a  proper  one. 

A  vote  for  each  share  renders  a  combination  between  a  few 
principal  stockholders,  to  monopolize  the  power  and  benefits 
of  the  bank,  too  easy.  An  equal  vote  to  each  stockholder, 
however  great  or  small  his  interest  in  the  institution,  allows  not 
that  degree  of  weight  to  large  stockholders  which  it  is  reason- 
able they  should  have,  and  which,  perhaps,  their  security,  and 
that  of  the  bank  require.  A  prudent  mean  is  to  be  pre- 
ferred. A  conviction  of  this  has  produced  a  by-law  of  the  cor- 
poration of  the  Bank  of  North  America,  which  evidently  aims 
at  such  a  mean.  But  a  reflection  arises  here,  that  a  like  majority 
with  that  which  enacted  this  law,  may,  at  any  moment,  repeal  it. 

The  last  inducement  which  shall  be  mentioned  is  the  want 
of  precautions  to  guard  against  a  foreign  influence  insinuating 
itself  into  the  direction  of  the  bank.  It  seems  scarcely  recon- 
cilable with  a  due  caution,  to  permit  that  any  but  citizens 
should  be  eligible  as  directors  of  a  national  bank,  or  that  non- 
resident foreigners  should  be  able  to  influence  the  appointment 
of  directors  by  the  votes  of  their  proxies.  In  the  event,  how- 
ever, of  an  incorporation  of  the  Bank  of  North  America,  in  the 
plan  it  may  be  necessary  to  qualify  this  principle,  so  as  to  leave 
the  right  of  foreigners,  who  now  hold  shares  of  its  stock,  unim- 
paired ;  but  without  the  power  of  transmitting  the  privileges  in 
question  to  foreign  alienees. 

It  is  to  be  considered  that  such  a  bank  is  not -a  mere  matter 
of  private  property,  but  a  political  machine  of  the  greatest 
importance  to  the  state. 

There  are  other  variations  from  the  constitution  of  the  Bank 
of  North  America,  not  of  inconsiderable  moment,  which 
appear  desirable,  but  which  are  not  of  magnitude  enough  to 
claim  a  preliminary  discussion.  These  will  be  seen  in  the  plan 
which  will  be  submitted  in  the  sequel. 

If  the  objections  which  have  been  stated  to  the  constitution 
of  the  Bank  of  North  America  are  admitted  to  be  well  founded, 
they  will,  nevertheless,  not  derogate  from  the  merit  of  the 
main  design,  or  of  the  services  which  that  bank  has  rendered, 
or  of  the  benefits  which  it  has  produced.  The  creation  of 
such  an  institution,  at  the  time  it  took  place,  was  a  measure 
dictated  by  wisdom.  Its  utility  has  been  amply  evinced  by  its 
fruits  —  American  independence  owes  much  to  it.     And  it  is 


646  CONTEST  FOR  SOUND  MONEY 

very  conceivable,  that  reasons  of  the  moment  may  have 
rendered  those  features  in  it  inexpedient,  which  a  revision,  with 
a  permanent  view,  suggests  as  desirable. 

The  order  of  the  subject  leads  next  to  an  inquiry  into  the 
principles  upon  which  a  national  bank  ought  to  be  organized. 

The  situation  of  the  United  States  naturally  inspires  a  wish 
that  the  form  of  the  institution  could  admit  of  a  plurality  of 
branches.  But  various  considerations  discourage  from  pursu- 
ing this  idea.  The  complexity  of  such  a  plan  would  be  apt  to 
inspire  doubts,  which  might  deter  from  adventuring  in  it.  And 
the  practicability  of  a  safe  and  orderly  administration,  though 
not  to  be  abandoned  as  desperate,  cannot  be  made  so  manifest 
in  perspective,  as  to  promise  the  removal  of  those  doubts,  or 
to  justify  the  government  in  adopting  the  idea  as  an  original 
experiment.  The  most  that  would  seem  advisable,  on  this 
point,  is,  to  insert  a  provision  which  may  lead  to  it  hereafter,  if 
experience  shall  more  clearly  demonstrate  its  utility,  and  satisfy 
those  who  may  have  the  direction  that  it  may  be  adopted  with 
safety.  It  is  certain  that  it  would  have  some  advantages,  both 
peculiar  and  important.  Besides  more  general  accommodation, 
it  would  lessen  the  danger  of  a  run  upon  the  bank. 

The  argument  against  it  is,  that  each  branch  must  be  under 
a  distinct,  though  subordinate  direction,  to  which  a  consider- 
able latitude  of  discretion  must  of  necessity  be  intrusted. 
And  as  the  property  of  the  whole  institution  would  be  liable 
for  the  engagements  of  each  part,  that  and  its  credit  would  be 
at  stake  upon  the  prudence  of  the  directors  of  every  part.  The 
mismanagement  of  either  branch  might  hazard  serious  disorder 
in  the  whole. 

Another  wish,  dictated  by  the  particular  situation  of  the 
country,  is,  that  the  bank  could  be  so  constituted  as  to  be 
made  an  immediate  instrument  of  loans  to  the  proprietors  of 
land ;  but  this  wish  also  yields  to  the  difficulty  of  accomplish- 
ing it.  Land  is  alone  an  unfit  fund  for  a  bank  circulation.  If 
the  notes  issued  upon  it  were  not  to  be  payable  in  coin,  on 
demand,  or  at  a  short  date,  this  would  amount  to  nothing  more 
than  a  repetition  of  the  paper  emissions,  which  are  now 
exploded  by  the  general  voice.  If  the  notes  are  to  be  payable 
in  coin,  the  land  must  first  be  converted  into  it  by  sale  or 
mortgage.  The  difficulty  of  effecting  the  latter,  is  the  very 
thing  which  begets  the  desire  of  finding  another  resource ;  and 
the  former  would  not  be  practicable  on  a  sudden  emergency, 
but  with  sacrifices  which  would  make  the  cure  worse  than  the 
disease.  Neither  is  the  idea  of  constituting  the  fund  partly  of 
coin  and  partly  of  land,  free  from  impediments.     These  two 


APPENDIX  647 

species  of  property  do  not,  for  the  most  part,  unite  in  the 
same  hands.  Will  the  moneyed  man  consent  to  enter  into 
a  partnership  with  the  landholder,  by  which  the  latter  will  share 
in  the  profits  which  will  he  made  by  the  money  of  the  former  ? 
The  money,  it  is  evident,  will  be  the  agent  or  efficient  cause  of 
the  profits;  the  land  can  only  be  regarded  as  an  additional 
security.  It  is  not  difficult  to  foresee  that  a  union,  on  such 
terms,  will  not  readily  be  formed.  If  the  landholders  are  to 
procure  the  money  by  sale  or  mortgage  of  a  part  of  their  lands, 
this  they  can  as  well  do  when  the  stock  consists  wholly  of 
money,  as  if  it  were  to  be  compounded  of  money  and  land. 

To  procure  for  the  landholders  the  assistance  of  loans,  is  the 
great  desideratum.  Supposing  other  difficulties  surmounted, 
and  a  fund  created,  composed  partly  of  coin  and  partly  of  land, 
yet  the  benefit  contemplated  could  only  then  be  obtained  by 
the  bank's  advancing  them  its  notes  for  the  whole,  or  part,  of 
the  value  of  the  lands  they  had  subscribed  to  the  stock.  If  this 
advance  was  small,  the  relief  aimed  at  would  not  be  given  ;  if  it 
was  large,  the  quantity  of  notes  issued  would  be  a  cause  of  dis- 
trust, and,  if  received  at  all,  they  would  be  likely  to  return 
speedily  upon  the  bank  for  payment ;  which,  after  exhausting 
its  coin,  might  be  under  the  necessity  of  turning  its  lands  into 
money,  at  any  price  that  could  be  obtained  for  them,  to  the 
irreparable  prejudice  of  the  proprietors. 

Considerations  of  public  advantage  suggest  a  further  wish, 
which  is,  that  the  bank  could  be  established  upon  principles 
that  would  cause  the  profits  of  it  to  redound  to  the  immediate 
benefit  of  the  State.  This  is  contemplated  by  many  who  speak 
of  a  national  bank,  but  the  idea  seems  liable  to  insuperable 
objections.  To  attach  full  confidence  to  an  institution  of  this 
nature,  it  appears  to  be  an  essential  ingredient  in  its  structure 
that  it  shall  be  under  a  private,  not  a  public  direction ;  under 
the  guidance  of  individual  interest,  not  of  public  policy,  which 
would  be  supposed  to  be,  and,  in  certain  emergencies,  under 
a  feeble  or  too  sanguine  administration,  would  really  be,  liable 
to  being  too  much  influenced  by  public  necessity.  The  sus- 
picion of  this  would  most  probably  be  a  canker  that  would  con- 
tinually corrode  the  vitals  of  the  credit  of  the  bank,  and  would 
be  most  likely  to  prove  fatal  in  those  situations  in  which  the 
public  good  would  require  that  they  should  be  most  sound  and 
vigorous.  It  would,  indeed,  be  little  less  than  a  miracle,  should 
the  credit  of  the  bank  be  at  the  disposal  of  the  government,  if, 
in  a  long  series  of  time,  there  was  not  experienced  a  calamitous 
abuse  of  it.  It  is  true,  that  it  would  be  the  real  interest  of  the 
government  not  to  abuse  it ;  its  genuine  policy  to  husband  and 


648  CONTEST  FOR  SOUND  MONEY 

cherish  it  with  the  most  guarded  circumspection,  as  an  inesti- 
mable treasure.  But  what  government  ever  uniformly  consulted 
its  true  interests  in  opposition  to  the  temptations  of  momentary 
exigencies  ?  What  nation  was  ever  blessed  with  a  constant 
succession  of  upright  and  wise  administrators  ? 

The  keen,  steady,  and,  as  it  were,  magnetic  sense  of  their 
own  interest  as  proprietors,  in  the  directors  of  a  bank,  pointing 
invariably  to  its  true  pole,  the  prosperity  of  the  institution,  is  the 
only  security  that  can  always  be  relied  upon  for  a  careful  and 
prudent  administration.  It  is,  therefore,  the  only  basis  on 
which  an  enlightened,  unqualified,  and  permanent  confidence 
can  be  expected  to  be  erected  and  maintained. 

The  precedents  of  the  banks  established  in  several  cities  of 
Europe,  (Amsterdam,  Hamburgh  and  others,)  may  seem  to 
militate  against  this  position.  Without  a  precise  knowledge  of 
all  the  peculiarities  of  their  respective  constitutions,  it  is  difficult 
to  pronounce  how  far  this  may  be  the  case.  That  of  Amster- 
dam, however,  which  we  best  know,  is  rather  under  a  municipal 
than  a  governmental  direction.  Particular  magistrates  of  the 
city,  not  officers  of  the  republic,  have  the  management  of  it. 
It  is  also  a  bank  of  deposite,  not  of  loan  or  circulation ; 
consequently,  less  liable  to  abuse,  as  well  as  less  useful.  Its 
general  business  consists  in  receiving  money  for  safe  keeping, 
which,  if  not  called  for  within  a  certain  time,  becomes  a  part 
of  its  stock,  and  irreclaimable ;  but  a  credit  is  given  for  it  on 
the  books  of  the  bank,  which  being  transferable,  answers  all 
the  purposes  of  money. 

The  directors  being  magistrates  of  the  city,  and  the  stock- 
holders, in  general,  its  most  influential  citizens,  it  is  evident  that 
the  principle  of  private  interest  must  be  prevalent  in  the  man- 
agement of  the  bank.  And  it  is  equally  evident  that,  from  the 
nature  of  its  operations,  that  principle  is  less  essential  to  it  than 
to  an  institution  constituted  with  a  view  to  the  accommodation 
of  the  public  and  individuals,  by  direct  loans  and  a  paper 
circulation. 

As  far  as  may  concern  the  aid  of  the  bank,  within  the  proper 
limits,  a  good  Government  has  nothing  more  to  wish  for  than  it 
will  always  possess,  though  the  management  be  in  the  hands  of 
private  individuals.  As  the  institution,  if  rightly  constituted,  must 
depend  for  its  renovation,  from  time  to  time,  on  the  pleasure 
of  the  Government,  it  will  not  be  likely  to  feel  a  disposition  to 
render  itself,  by  its  conduct,  unworthy  of  public  patronage. 
The  Government,  too,  in  the  administration  of  its  finances,  has 
it  in  its  power  to  reciprocate  benefits  to  the  bank,  of  not  less 
importance  than  those  which  the  bank  affords  to  the  Govern- 


APPENDIX  649 

ment,  and  which,  besides,  are  never  unattended  with  an  immedi- 
ate and  adequate  compensation.  Independent  of  these  more 
particular  considerations,  the  natural  weight  and  influence  of  a 
good  Government  will  always  go  far  towards  procuring  a  com- 
pliance with  its  desires  j  and  as  the  directors  will  usually  be 
composed  of  some  of  the  most  discreet,  respectable,  and  well- 
informed  citizens,  it  can  hardly  ever  be  difficult  to  make  them 
sensible  of  the  force  of  the  inducements  which  ought  to  stimulate 
their  exertions. 

It  will  not  follow,  from  what  has  been  said,  that  the  State 
may  not  be  the  holder  of  a  part  of  the  stock  of  a  bank,  and, 
consequently,  a  sharer  in  the  profits  of  it.  It  will  only  follow 
that  it  ought  not  to  desire  any  participation  in  the  direction  of  it, 
therefore,  ought  not  to  own  the  whole,  or  a  principal  part  of  the 
stock ;  for,  if  the  mass  of  the  property  should  belong  to  the 
public,  and  if  the  direction  of  it  should  be  in  private  hands, 
this  would  be  to  commit  the  interests  of  the  State  to  persons 
not  interested,  or  not  enough  interested  in  their  proper  man- 
agement. 

There  is  one  thing,  however,  which  the  Government  owes  to 
itself  and  the  community  —  at  least  to  all  that  part  of  it  who 
are  not  stockholders  —  which  is,  to  reserve  to  itself  a  right  of 
ascertaining,  as  often  as  may  be  necessary,  the  state  of  the 
bank ;  excluding,  however,  all  pretension  to  control.  This 
right  forms  an  article  in  the  primitive  constitution  of  the  bank 
of  North  America;  and  its  propriety  stands  upon  the  clearest 
reasons.  If  the  paper  of  a  bank  is  to  be  permitted  to  insinuate 
itself  into  all  the  revenues  and  receipts  of  a  country ;  if  it  is 
even  to  be  tolerated  as  the  substitute  for  gold  and  silver  in  all 
the  transactions  of  business,  it  becomes,  in  either  view,  a 
national  concern  of  the  first  magnitude.  As  such,  the  ordinary 
rules  of  prudence  require  that  the  Government  should  possess 
the  means  of  ascertaining,  whenever  it  thinks  fit,  that  so  delicate 
a  trust  is  executed  with  fidelity  and  care.  A  right  of  this 
nature  is  not  only  desirable,  as  it  respects  the  Government,  but 
it  ought  to  be  equally  so  to  all  those  concerned  in  the  institu- 
tion, as  an  additional  title  to  public  and  private  confidence, 
and  as  a  thing  which  can  only  be  formidable  to  practices  that 
imply  mismanagement.  The  presumption  must  always  be,  that 
the  characters  who  would  be  intrusted  with  the  exercise  of  this 
right  on  behalf  of  the  Government,  will  not  be  deficient  in  the 
discretion  which  it  may  require  ;  at  least,  the  admitting  of  this 
presumption  cannot  be  deemed  too  great  a  return  of  confidence 
for  that  very  large  portion  of  it  which  the  Government  is 
required  to  place  in  the  bank. 


650  CONTEST  FOR  SOUND  MONEY 

Abandoning,  therefore,  ideas  which,  however  agreeable  or 
desirable,  are  neither  practicable  nor  safe,  the  following  plan, 
for  the  constitution  of  a  national  bank-,  is  respectfully  submitted 
to  the  consideration  of  the  house. 

1.  The  capital  stock  of  the  bank  shall  not  exceed  ten  mill- 
ions of  dollars,  divided  into  twenty-five  thousand  shares,  each 
share  being  four  hundred  dollars ;  to  raise  which  sum  subscrip- 
tions shall  be  opened  on  the  first  Monday  of  April  next,  and 
shall  continue  open  until  the  whole  shall  be  subscribed.  Bodies 
politic  as  well  as  individuals  may  subscribe. 

2.  The  amount  of  each  share  shall  be  payable,  one  fourth 
in  gold  and  silver  coin,  and  three  fourths  in  that  part  of  the 
public  debt  which,  according  to  the  loan  proposed  by  the  act 
making  provision  for  the  debt  of  the  United  States,  shall  bear 
an  accruing  interest  at  the  time  of  payment  of  six  per  centum 
per  annum. 

3.  The  respective  sums  subscribed  shall  be  payable  in  four 
equal  parts,  as  well  specie  as  debt,  in  succession,  and  at  the 
distance  of  six  calendar  months  from  each  other;  the  first 
payment  to  be  made  at  the  time  of  subscription.  If  there 
shall  be  a  failure  in  any  subsequent  payment,  the  party  failing 
shall  lose  the  benefit  of  any  dividend  which  may  have  accrued 
prior  to  the  time  for  making  such  payment,  and  during  the 
delay  of  the  same. 

4.  The  subscribers  to  the  bank,  and  their  successors,  shall 
be  incorporated,  and  shall  so  continue  until  the  final  redemption 
of  that  part  of  its  stock  which  shall  consist  of  the  public  debt. 

5.  The  capacity  of  the  corporation  to  hold  real  and  personal 
estate  shall  be  limited  to  fifteen  million  of  dollars,  including 
the  amount  of  its  capital  or  original  stock.  The  lands  and 
tenements  which  it  shall  be  permitted  to  hold,  shall  be  only 
such  as  shall  be  requisite  for  the  immediate  accommodation 
of  the  institution ;  and  such  as  shall  have  been  bona  fide 
mortgaged  to  it  by  way  of  security,  or  conveyed  to  it  in  satis- 
faction of  debts  previously  contracted,  in  the  usual  course  of 
its  dealings,  or  purchased  at  sales  upon  judgments  which  shall 
have  been  obtained  for  such  debts. 

6.  The  totality  of  the  debts  of  the  company,  whether  by 
bond,  bill,  note,  or  other  contract,  (credits  for  deposits  ex- 
cepted,) shall  never  exceed  the  amount  of  its  capital  stock. 
In  case  of  excess,  the  directors,  under  whose  administration  it 
shall  happen,  shall  be  liable  for  it  in  their  private  or  separate 
capacities.  Those  who  may  have  dissented  may  excuse  them- 
selves from  this  responsibility  by  immediately  giving  notice  of 
the  fact   and  their  dissent  to  the  President  of  the   United 


APPENDIX  65 1 

States,  and  to  the  stockholders,  at  a  general  meeting,  to  be 
called  by  the  president  of  the  bank,  at  their  request. 

7.  The  Company  may  sell  or  demise  its  lands  and  tene- 
ments, or  may  sell  the  whole  or  any  part  of  the  public  debt, 
whereof  its  stock  shall  consist;  but  shall  trade  in  nothing, 
except  bills  of  exchange,  gold  and  silver  bullion,  or  in  the  sale 
of  goods  pledged  for  money  lent ;  nor  shall  take  more  than  at 
the  rate  of  six  per  centum  per  annum,  upon  its  loans  or 
discounts. 

8.  No  loans  shall  be  made  by  the  bank  for  the  use  or  on 
account  of  the  government  of  the  United  States,  or  of  either 
of  them,  to  an  amount  exceeding  fifty  thousand  dollars,  or  of 
any  foreign  prince  or  state,  unless  previously  authorized  by 
a  law  of  the  United  States. 

9.  The  stock  of  the  bank  shall  be  transferable,  according  to 
such  rules  as  shall  be  instituted  by  the  company  in  that  behalf. 

10.  The  affairs  of  the  bank  shall  be  under  the  management 
of  twenty-five  directors,  one  of  whom  shall  be  the  president ; 
and  there  shall  be,  on  the  first  Monday  in  January,  in  each 
year,  a  choice  of  directors,  by  a  plurality  of  suffrages  of  the 
stockholders,  to  serve  for  a  year.  The  directors,  at  their  first 
meeting  after  each  election,  shall  choose  one  of  their  number 
as  president. 

11.  The  number  of  votes  to  which  each  stockholder  shall 
be  entitled  shall  be  according  to  the  number  of  shares  he 
shall  hold,  in  the  proportions  following  —  that  is  to  say :  For 
one  share,  and  not  more  than  two  shares,  one  vote ;  for  every 
two  shares  above  two,  and  not  exceeding  ten,  one  vote;  for 
every  four  shares  above  ten,  and  not  exceeding  thirty,  one  vote  ; 
for  every  six  shares  above  thirty,  and  not  exceeding  sixty,  one 
vote  ;  for  every  eight  shares  above  sixty  and  not  exceeding  one 
hundred,  one  vote  ;  and  for  every  ten  shares  above  one  hun- 
dred, one  vote  ;  but  no  person,  copartnership,  or  body  politic, 
shall  be  entitled  to  a  greater  number  than  thirty  votes.  And, 
after  the  first  election,  no  share  or  shares  shall  confer  a  right 
of  suffrage,  which  shall  not  have  been  holden  three  calendar 
months  previous  to  the  day  of  election.  Stockholders  actually 
resident  within  the  United  States,  and  none  other,  may  vote  in 
elections  by  proxy. 

12.  Not  more  than  three  fourths  of  the  directors  in  office, 
exclusive  of  the  president,  shall  be  eligible  for  the  next  suc- 
ceeding year.  But  the  director  who  shall  be  president  at  the 
time  of  an  election,  may  be  always  re-elected. 

13.  None  but  a  stockholder,  being  a  citizen  of  the  United 
States  shall  be  eligible  as  a  director. 


652  CONTEST  FOR  SOUND  MONEY 

14.  Any  number  of  stockholders  not  less  than  sixty,  who  to- 
gether shall  be  proprietors  of  two  hundred  shares  or  upwards, 
shall  have  power  at  any  time  to  call  a  general  meeting  of  the 
stockholders,  for  purposes  relative  to  the  institution  ;  giving  at 
least  six  weeks'  notice  in  two  public  gazettes  of  the  place 
where  the  bank  is  kept,  and  specifying  in  such  notice  the 
object  of  the  meeting. 

15.  In  case  of  the  death,  resignation,  absence  from  the 
United  States,  or  removal  of  a  director  by  the  stockholders, 
his  place  may  be  filled  by  a  new  choice  for  the  remainder  of 
the  year. 

16.  No  director  shall  be  entitled  to  any  emolument,  unless 
the  same  shall  have  been  allowed  by  the  stockholders  at  a 
general  meeting.  The  stockholders  shall  make  such  compen- 
sation to  the  president,  for  his  extraordinary  attendance  at  the 
bank,  as  shall  appear  to  them  reasonable. 

17.  Not  less  than  seven  directors  shall  constitute  a  board  for 
the  transaction  of  business. 

18.  Every  cashier  or  treasurer,  before  he  enters  on  the 
duties  of  his  office,  shall  be  required  to  give  bond,  with  two  or 
more  sureties,  to  the  satisfaction  of  the  directors,  in  a  sum  not 
less  than  twenty  thousand  dollars,  with  conditions  for  his 
good  behavior. 

19.  Half  yearly  dividends  shall  be  made  of  so  much  of  the 
profits  of  the  bank,  as  shall  appear  to  the  directors  advisable. 
And  once  in  every  three  years,  the  directors  shall  lay  before 
the  stockholders,  at  a  general  meeting,  for  their  information, 
an  exact  and  particular  statement  of  the  debts  which  shall 
have  remained  unpaid,  after  the  expiration  of  the  original 
credit,  for  a  period  of  treble  the  term  of  that  credit,  and  of  the 
surplus  of  profit,  if  any,  after  deducting  losses  and  dividends. 

20.  The  bills  and  notes  of  the  bank  originally  made  payable, 
or  which  shall  have  become  payable  on  demand  in  gold  and 
silver  coin,  shall  be  receivable  in  all  payments  to  the  United 

States.  ,  t 

21.  The  officer  at  the  head  of  the  treasury  department  ot 
the  United  States  shall  be  furnished,  from  time  to  time,  as  often 
as  he  may  require,  not  exceeding  once  a  week,  with  statements 
of  the  amount  of  the  capital  stock  of  the  bank,  and  of  the  debts 
due  to  the  same,  of  the  moneys  deposited  therein,  of  the  notes 
in  circulation,  and  of  the  cash  in  hand ;  and  shall  have  a  right 
to  inspect  such  general  accounts  in  the  books  of  the  bank  as 
shall  relate  to  the  said  statements ;  provided  that  this  shall  not 
be  construed  to  imply  a  right  of  inspecting  the  account  of  any 
private  individual  or  individuals  with  the  bank. 


APPENDIX  653 

22.  No  similar  institution  shall  be  established  by  any  future 
act  of  the  United  States,  during  the  continuance  of  the  one 
hereby  proposed  to  be  established. 

23.  It  shall  be  lawful  for  the  directors  of  the  bank  to  estab- 
lish offices  wheresoever  they  shall  think  fit,  within  the  United 
States,  for  the  purpose  of  discount  and  deposit  only,  and  upon 
the  same  terms,  and  in  the  same  manner,  as  shall  be  practiced 
at  the  bank,  and  to  commit  the  management  of  the  said  offices, 
and  the  making  of  the  said  discounts,  either  to  agents  specially 
appointed  by  them,  or  to  such  persons  as  may  be  chosen  by 
the  stockholders  residing  at  the  place  where  any  such  office 
shall  be,  under  such  agreements,  and  subject  to  such  regula- 
tions, as  they  shall  deem  proper,  not  being  contrary  to  law,  or 
to  the  constitution  of  the  bank. 

24.  And,  lastly,  The  President  of  the  United  States  shall  be 
authorized  to  cause  a  subscription  to  be  made  to  the  stock  of 
the  said  company,  on  behalf  of  the  United  States,  to  an  amount 
not  exceeding  two  millions  of  dollars,  to  be  paid  out  of  the 
moneys  which  shall  be  borrowed  by  virtue  of  either  of  the  acts, 
the  one  entitled  "  An  Act  making  provision  for  the  debt  of  the 
United  States,"  and  the  other,  entitled  "  An  Act  making  pro- 
vision for  the  reduction  of  the  public  debt,"  borrowing  of  the 
bank  an  equal  sum,  to  be  applied  to  the  purposes  for  which 
the  said  moneys  shall  have  been  procured,  reimbursable  in  ten 
years  by  equal  annual  instalments ;  or  at  any  time  sooner,  or  in 
any  greater  proportions,  that  the  Government  may  think  fit. 

The  reasons  for  the  several  provisions,  contained  in  the  fore- 
going plan,  have  been  so  far  anticipated,  and  will  for  the  most 
part  be  so  readily  suggested  by  the  nature  of  those  provisions, 
that  any  comments  which  need  further  be  made  will  be  both 
few  and  concise. 

The  combination  of  a  portion  of  the  public  debt,  in  the  forma- 
tion of  the  capital,  is  the  principal  thing  of  which  an  explana- 
tion is  requisite.  The  chief  object  of  this  is  to  enable  the 
creation  of  a  capital  sufficiently  large  to  be  the  basis  of  an 
extensive  circulation,  and  an  adequate  security  for  it.  As  has 
been  elsewhere  remarked,  the  original  plan  of  the  Bank  of 
North  America  contemplated  a  capital  of  ten  millions  of  dollars 
which  is  certainly  not  too  broad  a  foundation  for  the  extensive 
operations  to  which  a  national  bank  is  destined.  But  to  collect 
such  a  sum  in  this  country  in  gold  and  silver  into  one  depository, 
may,  without  hesitation,  be  pronounced  impracticable.  Hence 
the  necessity  of  an  auxiliary,  which  the  public  debt  at  once 
presents. 

This  part  of  the  fund  will  be  always  ready  to  come  in  aid  of 


654  CONTEST  FOR  SOUND  MONEY 

the  specie  ;  it  will  more  and  more  command  a  ready  sale,  and 
can  therefore  expeditiously  be  turned  into  coin,  if  an  exigency 
of  the  bank  should  at  any  time  require  it.  This  quality  of 
prompt  convertibility  into  coin  renders  it  an  equivalent  for  the 
necessary  agent  of  bank  circulation,  and  distinguishes  it  from  a 
fund  in  land,  of  which  the  sale  would  generally  be  far  less  com- 
pendious, and  at  great  disadvantage.  The  quarter-yearly  re- 
ceipts of  interest  will  also  be  an  actual  addition  to  the  specie 
fund,  during  the  intervals  between  them  and  the  half-yearly  divi- 
dends of  profits.  The  objection  to  combining  land  with  specie, 
resulting  from  their  not  being  generally  in  possession  of  the 
same  persons,  does  not  apply  to  the  debt,  which  will  always  be 
found  in  considerable  quantity  among  the  moneyed  and  trading 
people. 

The  debt  composing  part  of  the  capital,  besides  its  collateral 
effect  in  enabling  the  bank  to  extend  its  operations,  and  conse- 
quently to  enlarge  its  profits,  will  produce  a  direct  annual  reve- 
nue of  six  per  centum  from  the  Government,  which  will  enter 
into  the  half-yearly  dividends  received  by  the  stockholders. 

When  the  present  price  of  the  public  debt  is  considered, 
and  the  effect  which  its  conversion  into  bank  stock,  incorpo- 
rated with  a  specie  fund,  would  in  all  probability  have  to 
accelerate  its  rise  tc  the  proper  point,  it  will  easily  be  dis- 
covered that  the  operation  presents,  in  its  outset,  a  very 
considerable  advantage  to  those  who  may  become  subscribers  ; 
and  from  the  influence  which  that  rise  would  have  on  the 
general  mass  of  the  debt,  a  proportional  benefit  to  all  the 
public  creditors,  and,  in  a  sense  which  has  been  more  than 
once  adverted  to,  to  the  community  at  large. 

There  is  an  important  fact  which  exemplifies  the  fitness  of 
the  public  debt  for  a  bank  fund,  and  which  may  serve  to 
remove  doubts  in  some  minds  on  this  point :  it  is  this,  that  the 
Bank  of  England,  in  its  first  erection,  rested  wholly  on  that 
foundation.  The  subscribers  to  a  loan  to  government  of 
one  million  two  hundred  thousand  pounds  sterling,  were  incor- 
porated as  a  bank,  of  which  the  debt  created  by  the  loan, 
and  the  interest  upon  it,  were  the  sole  fund.  The  subsequent 
augmentations  of  its  capital,  which  now  amounts  to  between 
eleven  and  twelve  millions  of  pounds  sterling,  have  been  of  the 
same  nature. 

The  confining  of  the  right  of  the  bank  to  contract  debts  to 
the  amount  of  its  capital,  is  an  important  precaution,  which  is 
not  to  be  found  in  the  constitution  of  the  Bank  of  North 
America,  and  which,  while  the  fund  consists  wholly  of  coin, 
would   be   a   restriction   attended   with   inconveniences ;    but 


APPENDIX  655 

would  be  free  from  any,  if  the  composition  of  it  should  be 
such  as  is  now  proposed.  The  restriction  exists  in  the  estab- 
lishment of  the  Bank  of  England,  and,  as  a  source  of  security, 
is  worthy  of  imitation.  The  consequence  of  exceeding  the 
limit  there,  is,  that  each  stockholder  is  liable  for  the  excess,  in 
proportion  to  his  interest  in  the  bank.  When  it  is  considered 
that  the  directors  owe  their  appointment  to  the  choice  of  the 
stockholders,  a  responsibility  of  this  kind  on  the  part  of  the 
latter  does  not  appear  unreasonable ;  but,  on  the  other  hand, 
it  may  be  deemed  a  hardship  upon  those  who  may  have  dis- 
sented from  the  choice ;  and  there  are  many  among  us,  whom 
it  might  perhaps  discourage  from  becoming  concerned  in  the 
institution.  These  reasons  have  induced  the  placing  of  the 
responsibility  upon  the  directors  by  whom  the  limit  prescribed 
should  be  transgressed. 

The  interdiction  of  loans  on  account  of  the  United  States, 
or  of  any  particular  State,  beyond  the  moderate  sum  specified, 
or  of  any  foreign  power,  will  serve  as  a  barrier  to  executive 
encroachments,  and  to  combinations  inauspicious  to  the  safety, 
or  contrary  to  the  policy  of  the  Union. 

The  limitation  of  the  rate  of  interest  is  dictated  by  the  con- 
sideration, that  different  rates  prevail  in  different  parts  of  the 
Union;  and  as  the  operations  of  the  bank  may  extend  through 
the  whole,  some  rule  seems  to  be  necessary.  '  There  is  room 
for  a  question,  whether  the  limitation  ought  not  rather  to  be 
five  than  six  per  cent.,  as  proposed.  It  may  with  safety  be 
taken  for  granted,  that  the  former  rate  would  yield  an  ample 
dividend,  perhaps  as  much  as  the  latter,  by  the  extension  which 
it  would  give  to  business.  The  natural  effect  of  low  interest  is 
to  increase  trade  and  industry ;  because  undertakings  of  every 
kind  can  be  prosecuted  with  greater  advantage.  This  is  a 
truth  generally  admitted  ;  but  it  is  requisite  to  have  analyzed 
the  subject  in  all  its  relations,  to  be  able  to  form  a  just  con- 
ception of  the  extent  of  that  effect.  Such  an  analysis  cannot 
but  satisfy  an  intelligent  mind,  that  the  difference  of  one  per 
cent,  in  the  rate  at  which  money  may  be  had,  is  often  capable 
of  making  an  essential  change  for  the  better  in  the  situation 
of  any  country  or  place. 

Everything,  therefore,  which  tends  to  lower  the  rate  of  in- 
terest, is  peculiarly  worthy  of  the  cares  of  legislators.  And 
though  laws  which  violently  sink  the  legal  rate  of  interest 
greatly  below  the  market  level  are  not  to  be  commended,  be- 
cause they  are  not  calculated  to  answer  their  aim ;  yet  what- 
ever has  a  tendency  to  effect  a  reduction,  without  violence  to 
the  natural  course  of  things,  ought  to  be  attended  to  and  pur- 


656  CONTEST  FOR  SOUND  MONEY 

sued.  Banks  are  among  the  means  most  proper  to  accomplish 
this  end ;  and  the  moderation  of  the  rate  at  which  their  dis- 
counts are  made,  is  a  material  ingredient  towards  it ;  with 
which  their  own  interest,  viewed  on  an  enlarged  and  permanent 
scale,  does  not  appear  to  clash. 

But,  as  the  most  obvious  ideas  are  apt  to  have  greater  force 
than  those  which  depend  on  complex  and  remote  combinations, 
there  would  be  danger  that  the  persons  whose  funds  must 
constitute  the  stock  of  the  bank,  would  be  diffident  of  the 
sufficiency  of  the  profits  to  be  expected,  if  the  rate  of  loans  and 
discounts  were  to  be  placed  below  the  point  to  which  they  have 
been  accustomed ;  and  might,  on  this  account,  be  indisposed 
to  embarking  in  the  plan.  There  is,  it  is  true,  one  reflection, 
which,  in  regard  to  men  actually  engaged  in  trade,  ought  to  be 
a  security  against  this  danger ;  it  is  this  —  that'the  accommoda- 
tions which  they  might  derive  in  the  way  of  their  business,  at  a 
low  rate,  would  more  than  indemnify  them  for  any  difference  in 
the  dividend;  supposing  even  that  some  diminution  of  it  were 
to  be  the  consequence.  But,  upon  the  whole,  the  hazard  of 
contrary  reasoning  among  the  mass  of  moneyed  men  is  a 
powerful  argument  against  the  experiment.  The  institutions  of 
the  kind  already  existing  add  to  the  difficulty  of  making  it. 
Mature  reflection,  and  a  large  capital,  may,  of  themselves,  lead 
to  the  desired  end. 

The  last  thing  which  requires  any  explanatory  remark  is, 
the  authority  proposed  to  be  given  to  the  President  to  sub- 
scribe to  the  amount  of  two  millions  of  dollars  on  account  of 
the  public.  The  main  design  of  this  is  to  enlarge  the  specie 
fund  of  the  bank,  and  to  enable  it  to  give  a  more  early  exten- 
sion to  its  operations.  Though  it  is  proposed  to  borrow  with 
one  hand  what  is  lent  with  the  other,  yet  the  disbursement  of 
what  is  borrowed  will  be  progressive,  and  bank  notes  may  be 
thrown  into  circulation  instead  of  the  gold  and  silver.  Besides, 
there  is  to  be  an  annual  reimbursement  of  a  part  of  the  sum 
borrowed,  which  will  finally  operate  as  an  actual  investment 
of  so  much  specie.  In  addition  to  the  inducements  to  this 
measure,  which  result  from  the  general  interest  of  the  Govern- 
ment to  enlarge  the  sphere  of  the  utility  of  the  bank,  there  is 
this  more  particular  consideration,  to  wit :  that,  as  far  as  the 
dividend  on  the  stock  shall  exceed  the  interest  paid  on  the  loan, 
there  is  a  positive  profit. 

The  Secretary  begs  leave  to  conclude  with  this  general  obser- 
vation :  that  if  the  Bank  of  North  America  shall  come  forward 
with  any  propositions  which  have  for  their  object  the  ingrafting 
upon  that  institution  the  characteristics  which  shall  appear  to 


APPENDIX  657 

the  legislature  necessary  to  the  due  extent  and  safety  of  a  na- 
tional bank,  there  are,  in  his  judgment,  weighty  inducements  to 
giving  every  reasonable  facility  to  the  measure.  Not  only  the 
pretensions  of  that  institution,  from  its  original  relation  to  the 
Government  of  the  United  States,  and  from  the  services  it  has 
rendered,  are  such  as  to  claim  a  disposition  favorable  to  it,  if 
those  who  are  interested  in  it  are  willing,  on  their  part,  to  place 
it  on  a  footing  satisfactory  to  the  Government,  and  equal  to  the 
purposes  of  a  Bank  of  the  United  States,  but  its  co-operation 
would  materially  accelerate  the  accomplishment  of  the  great 
object ;  and  the  collision,  which  might  otherwise  arise,  might, 
in  a  variety  of  ways,  prove  equally  disagreeable  and  injurious. 
The  incorporation  or  union  here  contemplated  may  be  effected 
in  different  modes,  under  the  auspices  of  an  act  of  the  United 
States,  if  it  shall  be  desired  by  the  Bank  of  North  America, 
upon  terms  which  shall  appear  expedient  to  the  Government. 
All  which  is  humbly  submitted. 

Alexander  Hamilton, 
Secretary  of  the  Treasury. 
Treasury  Department, 
December  13,  1790. 


2U 


INDEX 


Adams,  John  Quincy,  report  on  par  of  ex- 
change, 28;  on  Bank  of  U.  S.,  99, 
100. 

Articles  of  Confederation,  on  coinage,  13, 
453;  on  paper  money,  58,  454. 

"  Asset  currency,"  first  suggested  by  Comp- 
troller Cannon,  352;  Baltimore  plan, 
381;  Gage's  plan,  397;  Shaw's  plan, 
408;  general  discussion,  427;  exam- 
ples of,  428-431. 

Auxiliary  currency,  use  of  1893,  374. 

Banking  power  by  sections,  153,  169,  346, 
358,  4M- 

Bank-notes,  see  National  Bank-notes, 
State  Bank-notes. 

Bank  of  North  America,  incorporation  of, 
59;  unsuited  for  federal  purposes,  64, 
640. 

Bank  of  the  U.  S.,  Hamilton's  plan  for,  62, 
624. 
First,  charter  of,  70, 456;  constitutionality 
of,  65,  80,  98;  influence  on  currency, 
71;  operations  of,  71;  renewal  of 
charter  defeated,  73. 
Second,  plan  for,  80-82;  Madison  on, 
81-82;  charter,  82,  475;  early  mis- 
management, 84-85;  Cheves's  refor- 
mation, 85,  89;  operations  of  84-89, 
93;  states  oppose,  88;  Supreme 
Court  on,  66-69;  Biddle's  administra- 
tion, 94-109;  "  bank  war,"  97-109; 
Jackson's  attacks,  97,  101,  102,  108; 
Congressional  investigations,  99-101, 
105,  108;  Kandall  and  Kitchen  Cabi- 
net, 99,  101,  105,  107;  defeat  of  re- 
charter,  101 ;  removal  of  public  de- 
posits, 104-108;  branch  drafts,  88, 
100;  great  utility  of,  95,  104,  no, 
in,  112;  regulation  of  currency  by, 
93.  96,  58,  in,  170,  425;  govern- 
ment's shares  in,  82,  96,  104,  109, 116; 
statements  of  condition,  117,  119;  ac- 
cepts Pennsylvania  charter,  109,  122; 
see  U.  S.  Bank  of  Pennsylvania. 
Third,  plans  for,  144-147;  defeat  of,  146; 
Tyler  on,  145,  146. 

Banks,   statistics  of,  75,  118,  119,  153,  336, 

347.  359.  36°.  394.  4*3- 
Banks  owned  by  states,  74,  92,  138,  142; 

Indiana,    139;   Ohio,   143;    Supreme 

Court  on,  130. 
Benton,  Thomas  H. ,  on  change  of  ratio,  38 


40;  opposes  Bank  of  U.  S.,  99,  100; 
favors  subtreasury  bill,  125. 

Bibliography,  437. 

Bimetallism,  Hamilton's  plan,  21,  24,  416, 
595;  failure  of,  24,  49,  416;  interna- 
tional, 285,  294,  303,  306,  385,  388, 
395;  impossibility  of,  24,  34,  36,  45, 
306,  309,  416;  Silver  Commission, 
1876,  282-286;  international  confer- 
ences on,  292-294,  301,  368,  396; 
British  Commission  on,  309-312. 

Bland-Allison  silver  law,  287-290,  563. 

Board  of  Treasury,  report  to  Continental 
Congress,  16. 

Bond-deposit  system,  136,  138,  155;  abroga- 
tion advocated,  399,  427;  defects  of, 

'72>  33°- 

Bonds,  United  States,  Chase's  sales  of,  180, 
193;  payments  of,  in  notes  proposed, 
210;  scaling  down  proposed,  212; 
payment  in  silver  discussed,  286,  288, 
289,  291,  300;  purchase  of,  with  sur- 
plus, 161,  165,  247,  354;  authorized 
to  provide  gold  for  reserve,  224,  403, 
560,  578 ;  refunding  of,  218,  242,  344, 
403 ;  sales  of,  to  obtain  gold,  237,  378, 
380,  382,  383,  legality  of,  379;  syn- 
dicate 1895,  382;  held  by  national 
banks,  348,  359;  prices  of,  348,  359, 
391.  4"- 

Boutwell,  George  S.,  Secretary  of  Treas- 
ury, 214-220;  issues  "greenback  re- 
serve," 217,  220;  opposes  contraction, 
220;  opportunist  policy  of,  220; 
against  certifying  checks,  329;  on 
silver,  285. 

Branch  banking,  89,  139,  143. 

Bristow,  Benjamin  H.,  Secretary  of  Treas- 
ury, 223,  230. 

British  coins  in  use,  n;  valued,  13. 

British  Gold  and  Silver  Commission,  report, 
309-313. 

Bryan,  William  J.,  campaigns  for  "free 
silver,"  386,  404. 

Buchanan,  James,  President,  on  banks,  166. 

Bullion  certificates,  authorized,  47,  497. 

Calhoun,  John  C,  on  national  bank,  79-82, 
126. 

Canada,  banking  system  of,  429-431. 

Carlisle,  John  G.,  Secretary  of  Treasury, 
371-390;  policy  on  silver,  372;  on 
deficits,   377;    sells  bonds  to  obtain 


659 


66o 


INDEX 


gold,  378,  380,  38a,  383 ;  urges  retire- 
ment of  greenbacks,  381,  384,  389; 
plan  for  bank  currency,  381. 

Chase,  Salmon  P.,  Secretary  of  Treasury, 
177-196;  reports,  178,  180,  190,  194; 
policy  as  to  banks,  181,  199,  201; 
urges  national  banking  system,  180, 
191,  320;  on  legal  tenders,  185;  re- 
view of  administration  of,  198-202 ;  as 
Chief  Justice,  on  legal  tender,26i,  267. 

Checks,  certification  of,  329,  330,  344,  546, 
569;  use  of,  in  lieu  of  currency,  343, 

374- 

Circulation  of  the  country,  75,  120,  154, 
174,  204,.  228,  256-257,  392,  411. 

Civil  War  period,  177-203;  influence  of,  on 
currency,  5,  173,  202,  273,  419. 

Clay,  Henry,  on  Bank  of  U.  S.,  73,  82,  99, 
125,  145;  conflict  with  Jackson,  99, 
103,  107,  no;  opposes  subtreasury 
act,  125;  conflict  with  Tyler,  145- 
147. 

Clearing-house,  system  established,  156, 
158;  operation  described,  156;  salu- 
tary influence  of,  157;  exchanges, 
volume  of,  174,  336,  348,  360,  394. 
414;  loan  certificates,  244,  332,  349, 
35°.  355>  374~376;  table  of,  at  New 
York,  375. 
New  York,  and  silver,  344,  569. 

Cleveland,  Grover,  President,  on  silver, 
247,  304,  306,  308;  on  surplus  in 
treasury,  250;  on  redemption  of  notes 
in  gold,  372,  382 ;  bond-syndicate 
contract,  382;  on  legal  tenders,  381, 
384,  389- 

Coin,  purchase  law  of  1862,  189,  502;    re- 
vived 1895,  382. 
Payment  of  bonds  and  notes  in,  214,  286, 

547- 

Coinage  charge,  17,  21,  23,  25,  280,  554,  560. 

Ordinance  of  1786,  16,  454,  455;    laws, 

1792,  22,  463;   1834,  40,  479;   1837,  41, 

485:   1853,  44.   495;    1873,    277-280, 

552. 

Plans,   Morris,    14;  Jefferson,   15,   584; 

Board  of  Treasury,  16;  Hamilton,  20, 

59i- 
Statistics,  33, 50,  51.  52,  275,  296,  318. 

Coins,  weight  and  fineness  of,  22,  40,  41,  44, 
280;  see  also  Gold,  Silver,  Subsidi- 
ary, Minor,  and  Coinage  Laws. 

Colonial  coins,  n,  451;  currency,  53. 

Compound  interest  notes,  196,  197,  537,  544. 

Constitution,  narrow  construction  of,  4,  145, 
173;  provisions  as  to  coins,  18,  paper, 
60,  61,  legal  tender,  61;  bank  charter 
under,  64-69,  80,  98,  102 ;  state  bank- 
notes under,  130,  161 ;  on  currency  in 
legal  tender  cases,  259-273;  broader 


construction     favorable     to     sound 
money,  273,  418. 

Continental  currency,  54-59,  453;  legal 
tender  of,  55,  58;  depreciation,  57, 
58;  volume  of,  59;  redemption  of, 
59- 

Counterfeit  detectors,  159-160. 
State  bank-notes,  90,  160,  177. 

Crawford,  William  H.,  Senator,  favors 
charter  Bank  of  U.  S.,  73;  Secre- 
tary of  Treasury,  special  report  1820, 
29;  recommends  change  of  ratio,  30, 
31 ;  estimates  of  bank  currency,  77 ; 
efforts  to  reform  currency,  85,  91 ; 
opposes  government  notes,  86. 

"  Crime  of  1873,"  277-290. 

Crisis  of  1890,  354,  364;  of  1893,  372,  377. 

Currency,  see  under  State  Bank-notes, 
National  Bank-notes,  United  States 
Notes,  Treasury  Notes. 

Currency  Banking  vs.  Deposit  Banking, 
M1,   ?55- 

Currency  certificates,  authorized,  219,  331, 
552;  abolished,  403,  580. 

Debt  of  the  United  States,  see  also  Bonds, 
U.  S-.;  statistics  of,  177,  203,  205,  227, 
256,  391,  411;  validity  of.  207,  213; 
refunding  acts,  211,  218,  238,  242,  543, 
55i.  581. 

"  Debtor  Class,"  216,  268,  306,  387. 

Decimal  system  of  money,  Jefferson  on,  15, 
584;  Congress  on,  16,  454;  Hamilton 
on,  21,  617. 

Deficits,  see  Treasury,  Condition  of. 

Demand  notes,  179,  183,  189,  498,  499,  501, 
502. 

Democrats  (Jeffersonian),  oppose  Bank  of 
U.  S.,  64;  favor  it,  71,  73,  79-82; 
(Jacksonian)  oppose  Bank  of  U.  S., 
97-109,  125,  145;  favor  subtreasury 
system,  124-129,  148. 
Weak  policy  on  state  bank-notes,  161, 
172;  oppose  greenbacks,  184;  favor 
greenbacks,  210,  340;  on  public  debt, 
an,  215;  against  national  banks,  215, 
322,  340;  oppose  resumption  act,  225, 
230,  233;  on  surplus,  247;  on  silver, 
282,  286,  298,  304,  312,  316,  373;  for 
free  coinage,  386,  404;  favor  state 
bank-notes,  367 ;  on  legal  tender,  260, 
263,  271 ;  coalesce  with  populists,  386, 

4<M- 

Denominations  of  notes,  77,  78,  83, 183, 190, 

307,  403,  500,  508,  518,  580,  582;  see 

also  Small  Notes. 
Deposit  act,  of  1836, 113, 480,  repealed,  144; 

of  1861,  179,  499;  of  1864,  198,  324, 

530. 
Depository  banks,  78,  113,  123;   condition 


INDEX 


66 1 


of,  1836,  115,  I24'>  Van  Buren  on, 
124, 137;  national,  198,  324,423,  530, 
deposits  in,  249,  353,  410. 

Depreciation  of  currency,  54,  77,  87,  go,  131, 
189,  204,  229,  258. 

Distribution  of  surplus,  114,  122,  123,  125, 
484. 

Dollar,  adopted  as  unit,  12,  16,  454,  464: 
silver,  demonetized,  277;  remone- 
tized,  290,  563;  gold  as  unit,  con- 
firmed, 403,  406,  553,  577. 

Double  standard,  see  Bimetallism. 

Elasticity  of  currency,  332,  352,  370,  406. 
Examination  of  banks,  135,  141,  339,  534. 
Exchange,  domestic,   87;    Bank  of  U.  S. 

and,  96,  in,  112,  770;  cost  of,  112, 

I3ii337;  volume  of,  355. 
Foreign,    121;    par  of  sterling,  28,  42, 

280,  554. 
Exports  and    imports,    merchandise,    121, 

204,  228,  257,   392,   412;  specie,   27, 

33,  121,  204,  228,  257,  296;  gold,  51, 

52,  296,  319,  392,  412;  silver,  51,  52, 

296,  319,  392,  412. 

Failures,  123,  151,  348,  360,  376,  394,  414; 
of  national  banks,  335,  345,  432. 

Fairchild,  Charles  S.,  Secretary  of  Treas- 
ury, 249-252;  deposits  in  banks,  249; 
increases  gold  reserve,  249,  312;  on 
silver,  308,  312. 

Fineness  of  coins,  15,  21,  23,  40,  41,  454, 
465,  485,  553;  see  also  Coinage  Laws. 

Foreign  coins,  in  use,  11;  attempts  to  de- 
monetize, 17.  21,  26,  468;  valuation 
and  legal  tender  of,  25,  26,  29,  40, 
48,  468,  574;    use  of  abrogated,  48, 

497- 

Foreign  holdings  of  debt,  estimates  of,  132, 
164,  208,  212. 

Fractional  currency,  190,  193,  505,  508,  539; 
retirement  of,  224,  559,  562. 

France,  on  silver,  277,  284,  293,  301,  369. 

Free  banking,  before  the  war,  136,  138, 152, 
155;  after  the  war,  224,  229,  332,  335, 
337.  5°°- 

Free  coinage  of  silver,  propositions,  232, 
238,  281,  287,  298,  316,  363,  366,  386, 
405. 

Funding  of  greenbacks  into  bonds,  author- 
ized, 183,  500,  503;  abrogated,  194, 
508;  of  debt,  see  Debt,  Bonds. 

Gage,  Lyman  J.,  Secretary  of  Treasury, 
396-408;  advocates  gold  standard, 
396,  retirement  of  greenbacks,  397; 
safety  fund  for  bank-notes,  397,  plan 
for  elastic  currency,  406. 

Gallatin,  Albert,  Secretary  of  Treasury,  on 


change  of  ratio,  35,  37;  on  Bank  of 
U.  S.,  71,  72,  96;  state  bank  statis- 
tics, 91,  117;  appeals  for  sound 
money,  123. 

Germany,  on  silver,  277,  294,  302;  elastic 
bank-note  system  of,  428. 

Gold,  discoveries,  38,  40,  43;  exports  and 
imports,  33,  51,  52,  296,  319,  392, 
412;  pfoduction,  18,  32,  50,  51,  52, 
295,  318,  392,  412;  valuation  of,  13, 
17,  41,  455;  scarcity  of,  27,  29,  190; 
speculation  in,  196,  attempt  to  check, 
196,  "Black  Friday,"  218;  govern- 
ment sales  of,  225,  229 ;  falling  off  in 
product,  304;  obligations,  303;  ex- 
cessive export  movement  1893-1896, 
364,  372,  380,  389;  conspiracy  favor- 
ing, charged,  284 ;  premium  on,  189, 
196,  204,  208,  216,  229,  233,  258; 
coinage,  33,  50,  51,  52,  296;  notes  re- 
deemed in,  239,  365,  382,  392,  412; 
bond  sales  to  obtain,  237,  379,  380, 
382,  383 ;  bars,  sale  of,  566, 574 ;  propo- 
sition to  prohibit  exports  of,  31. 

Gold  certificates,  authorized,  193,  243,  403, 
509,  568,  579;  first  issued,  208;  issue 
suspended,  237;  use  of,  418. 

Gold  reserve,  209,  237,  245,  246,  249,  304, 
3I2>  37',  383,  392.  412:  fixed,  243, 
569,578;  endangered,  245 ;  impaired, 
372;  repeatedly  restored,  378,  380, 
382;   protected,  403,  421,  422,  577. 

Gold  standard,  advocated,  37,  39,  45,  285, 
388,  398;  denounced,  387,  404;  con- 
templated, 45,  277;  struggle  for,  363- 
405;  adoption  of,  402,  404,  577;  Ger- 
many  adopts,  277;    in  Europe,  294, 

37°-  384- 

Government  notes,  opposed  by  Hamilton, 
63,  173,  639,  by  Crawford,  86;  fav- 
ored by  Jefferson,  79,  by  Madison, 
81,  by  Tyler,  148;  Chase  on,  178, 
180,  199;  power  to  issue,  discussed, 
61,  259-273,  418;  see  also  Treasury 
Notes,  United  States  Notes. 

Grant,  Ulysses  S.,  President,  on  the  public 
debt,  214;  on  currency,  216,  222,  332; 
on  resumption,  221,  224;  on  inflation, 
veto,  223;  on  free  banking,  332. 

Great  Britain  on  silver,  293,  301,  309-312, 
369;  action  in  India,  377,  409. 

"  Greenbacks,"  see  U.  S.  Notes,  Legal 
Tender  Decisions,  etc. 

Greenbackers.  210,  231,  236,  240,  344,  251; 
against  national  banks,  340. 

Hamilton,  Alexander,  Secretary  of  Treas- 
ury, report  on  mint  system,  21,  591; 
national  bank,  62,  624;  on  constitu- 
tionality of  bank,  64,  broad  construe- 


662 


INDEX 


tion,  65;  influence  of,  for  sound 
money,  5,  74,  no,  425;  on  govern- 
ment notes,  63,  173,  639. 

Harrison,  Benjamin,  President,  309;  on 
silver,  313,  366. 

Hayes,  Rutherford  B.,  President,  supports 
resumption,  233;  favors  retirement  of 
greenbacks,  239,  241;  opposes  free 
coinage,  288;  silver  veto,  290;  on 
silver,  297,  299. 

Imports,  see  Exports  and  Imports. 

Indiana,  state  bank  of,  139-141,  154;  banks 
of,  158. 

Indianapolis  Monetary  Convention,  397-399. 

Inflation,  bill  of  1874,  222,  332;  propositions 
1870,  222;  of  bank  currency,  1815, 
77;  1837,  134,  151;  1857,  167;  1864, 
197;  1870,  218;  of  silver,  1878,  241, 
291 ;   1890,  254. 

Ingham,  Samuel  D.,  Secretary  of  Treasury, 
report  on  currency,  34;  on  change  of 
ratio,  35;  in  bank  war,  99;  on  Bank 
of  U.  S.,  in. 

Interest,  payments  by  national  banks,  dis- 
cussed, 329,  334;  rates,  reduction  of, 
34i- 

International  Monetary  Conference,  of  1867, 
276;  of  1878,  292-294;  of  1 881,  301; 
of  1892,  368. 

Jackson,  Andrew,  President,  attacks  Bank 
of  U.  S.,  97-109;  veto  of  recharter 
bill,  101;  and  Supreme  Court,  102; 
removal  of  deposits,  104-108;  on 
"moneyed  interests,"  109;  Kitchen 
Cabinet  of,  99,  101,  105,  107,  126. 

Jefferson,  Thomas,  coinage  plan,  15,  39, 
416,  583;  approves  Hamilton's  plan, 
21,  623;  suspends  dollar  coinage,  27; 
opposes  Bank  of  U.  S.,  64;  favors 
government  notes,  79. 

Johnson,  Andrew,  views  on  coinage,  46;  on 
currency,  206,  209;  on  scaling  debt, 
212. 

Latin  Union.  277,  309. 

"  Lawful  money,"  183;  defined,  343. 

Legal  tender,  constitutional  provision,  60, 

456;    decisions,  259-273;    discussed, 

272,  419. 
Of  coin,   gold,  23,  466,   479,   486,  553; 

silver  dollars,  23,  41,  46,  49,  281,  289, 

291,  403,  417,   466,    486,    564,    578; 

subsidiary   silver,   44,   45,   280,   299, 

495,  553,  566;  foreign  coin,  17,  468, 

496. 
Of  paper,  colonial,  53;    continental,  55, 

58;    early  Treasury  notes,  78,   173; 

United    States    notes,   183-189,   199, 


248,    500,    503,    305,   507,   5°8,   538; 

Treasury  notes  of  1890,  314,  572. 
Legal    tender    notes,    see    United  States 

Notes. 
Lincoln,  Abraham,  President,  on  currency, 

191. 
Louisiana,  banks  of,  142,  168. 

Madison,  James,  opposes  paper  money,  61, 
Bank  of  U.  S.,  64;  favors  govern- 
ment notes,  81,  national  bank,  79,  81. 

Manning,  Daniel,  Secretary  of  Treasury, 
246-249;  on  evils  of  legislation  of 
1878,  246;  on  legal  tenders,  248; 
policy  as  to  surplus,  248;  on  silver, 
305,  306,  308. 

Marshall,  John,  Chief  Justice,  influence  of, 
for  nationalization,  5,  420;  on  Bank 
of  U.  S.,  66-^9. 

Massachusetts,  early  issues  of  paper,  53; 
early  coinage  act,  451 ;  banks  of,  60, 
76,  117,  119;  Suffolk  system,  92, 
135,  156. 

Matthews's  silver  resolution,  291. 

McCulloch,  Hugh,  Comptroller,  322;  on 
government  notes,  328. 
Secretary  of  Treasury,  205-214  ;  on 
paper  currency,  206,  207;  contracts 
greenbacks,  207,  209,  328;  gold  re- 
serve of,  209;  second  term,  245; 
struggle  to  avoid  silver  basis,  246; 
on  silver  danger,  303,  304. 

McKinley,  William,   on   surplus,  247;    on 
silver,  290,  313,  386;  tariff  act,  396. 
As    President,   still   favors   silver,  395; 
signs  gold  standard  law,  402. 

Michigan  banks,  138. 

Minor  coin,  16,  22,  24,  467. 

Mint  act,  of  1786, 17,  454;  of  1792,  22,  463; 
of  1834,  40,  479;  of  1837,  41,  485;  of 
1853,  44,  495;  of  1873,  277,  552. 

Money  in  the  country,  31,  47;  statistics  of, 
75,  120,  154,  174,  204,  228,  256,  257, 
384,  392»  405,  4"- 

Money  of  account,  23,  454,  467. 

"More  money"  cry.  226,  255,  274,  328, 
337,  34°.  367,  373- 

National  bank  act,  194,  510;  amendments, 
326,  330,  333,  335,  343,  352,  404,  542, 
545,  546,  547,  55'.  554,  556,  559,  560, 
561,  566,  570,  575,  581,  582,  583. 

National  banking  system,  320-360;  dis- 
cussed. 426,  431;  growth  of,  356,  432. 

National  bank-notes,  provisions  of  original 
law,  323,  518,  519;  intended  to  super- 
sede greenbacks,  321 ;  volume  of,  limit 
of,  323,  328,  518,  extended,  330,  547, 
removed,  335,  560,  redistribution,  326, 
33°.  333.  542.  547,  556,  inelasticity  of, 


INDEX 


663 


330,  427;  substitution  of  greenbacks 
for,  proposed,  328,  337,  340,  404;  re- 
demption of,  323,  333,  523,  530,  551, 
556,  567;  security  of,  323,  328,  518, 
520;  bond  deposit  provision,  322,  344, 
351,  518,  520,  542,  567,  582;  retire- 
ment of  limited,  343,  404,  568,  583; 
free  banking,  335,  560;  redemption 
fund,  250,  254,  333,  357,  528,  551,  556, 
567;  statistics  of,  336,  347,  359,  394, 
410,  413. 

National  banks,  proposed,  191;  first  act, 
194,  321,  506;  revised  act,  322,  510; 
difference  between  acts,  324;  at- 
tacked, 215,  240,  328,  340;  examina- 
tion, 324,  339,  534;  receiverships,  323, 
338,  523»  525.  S32.  562,  57°.  575 1  re- 
•  ports  required,  324,  330,  339,  524, 
545 ;  charters  extended,  242,  343,  566, 
584;  failures  of,  335,  345,  432;  inter- 
est on  deposits,  329,  334;  interest 
rates,  341,  522;  certified  checks,  329, 
33°.  344.  546,  569;  earnings  of,  335, 
338>  345.  546;  taxation  of,  324,  404, 
432,  510,  527,  570,  583;  loans  on  U.  S. 
notes  prohibited.  213,  330,545;  gold 
banks,  331,  549;  reserves  of,  323,  327, 
333.  522>  544.  552.  55°:  capital,  provi- 
sions as  to,  322,  512,  554,  581;  statis- 
tics of,  336,  347,  359,  393.  4°4.  4'°.  4'3- 

National  finances,  statistics  of,  203,  227, 
256,  391,  411. 

Nationalization  of  currency  imperative,  5,  7. 

New  York  City,  banks  in  panic  of  1857,  163, 
of  1873,  332,  of  1884,  350,  of  1893,  373, 
378;  clearing-house,  156,  statistics 
of,  174,  336,  348,  360,  394,  404,  reserve 
established,  157,  loan  certificates, 
table  of,  375. 

New  York  State,  banks  of,  93,  135,  156; 
bond  deposit  plan,  136;  safety  fund 
system,  93, 135;  banking  department, 
156;  system,  basis  of  national,  320. 

Ohio,  opposition  to  Bank  of  U.  S.,  88;  state 
bank  of,  143. 

Panics,  1857,  163;  1873,221,331;  1884,244, 
349;   1893,  372,  377;   discussed,  163, 

349- 

Paper  currency,  see  Continental  Cur- 
rency, National  Bank-notes,  State 
Bank-notes,  Treasury  Notes,  U.  S. 
Notes. 

Polk,  James  K.,  opposes  Bank  of  U.  S.,  99, 
105;  on  subtreasury  and  banks,  148- 
151. 

Populist  party,  367,  385,  404. 

Premium  on  gold,  189,  194,  196,  204,  208, 
216,  229,  233,  258. 


Prices,  204,  229,  258. 

Private  banks,  statistics,  360,  394,  413. 

Production  of  gold  and  silver,  statistics,  18, 
32,  50,  295,  318,  392,  412. 

Public  credit  act,  proposed,  213;  passed, 
214,  547;  partially  ignored,  215,  217. 

Public  dues,  currency  receivable  for,  Bank 
of  U.  S.,  70,  84,  90,  463,  477;  state 
banks,  91,  93,  482;  national  banks, 
323,519;  under  subtreasury  act,  493; 
silver  certificates,  289,  565;  gold  cer- 
tificates, 243,  509,  569,  579;  Treasury 
notes,  78,  173,  472,  499;  see  also 
Legal  Tender. 

Public  moneys,  U.  S.,  62,  78,  83,  86,  90, 104, 
109,  113,  123,  125,  129,  149;  see  also 
Depository  Banks,  Subtreasury, 
Surplus. 

Railway  securities,  banks  and,  163,  164. 

Ratio  between  gold  and  silver,  1776,  13; 
Jefferson  on,  15,  589;  Hamilton  on, 
21,595;  in  act  of  1786,  17,  1792,  22, 
464,  1834,  40,  1837,  41,  1876,  283  ; 
change  of,  discussed,  29,  30,  35,  36, 
38,  283;  commercial,  annually,  18, 
32,  50,  295,  318,  392,  412, 

Redemption  of  notes,  see  under  the  several 
classes. 

Removal  of  deposits,  104-106;  effect  of,  112. 

Republicans,  favor  greenbacks,  184;  favor 
contraction,  207,  oppose  it,  210;  on 
public  debt,  211,213,219;  on  resump- 
tion, 214,  219,  224,  231;  on  silver, 
282,  286,  298,  312,  316,  367,  373;  on 
national  banks,  322, 335,  340;  halting 
policy  of,  226, 238,  334,  386,  395 ;  pass 
gold  standard  law,  402 ;  on  legal  ten- 
der, 262,  263,  270;  silver  wing  of, 
313,  366. 

Repudiation  of  debt,  proposed,  207,  211; 
defeated,  212,  213. 

Reserve,  of  national  banks,  323,  327,  333; 
cities,  323,  353,  522,  570;  "green- 
back," 217,  220,  221;  see  also  Gold 
Reserve. 

Resumption  act  of  1875,  224,  335,  559; 
attack  on,  230,  233,  235;  bond  issues 
under,  273,  378. 

Resumption  of  specie  payments,  1817,  85; 
1838,130;  1843,151;  1858,166;  1879, 
236. 

Richardson,  William  A.,  Secretary  of  Treas- 
ury, 221. 

Safety  fund  system,  93,  135;  Baltimore 
plan,  381;  Canadian,  430;  Cannon 
on,  352;  Gage  on,  397;  Shaw  on, 
409;  Indianapolis  commission,  398; 
discussed,  430. 


664 


INDEX 


Savings  bank  statistics,  174,  336,  348,  360, 

394.  4M- 

Sectional  views  on  money,  226,  337,  346, 
389;  votes,  223,  236,  254,  290. 

Seigniorage,  coining  the,  379,  380;  legal 
provisions  on,  496,  564. 

Seven-thirty  notes,  179,  180,  197,  498,  537, 
54°- 

Shaw,  Leslie  M.,  Secretary  of  Treasury, 
408-409. 

Sherman,  John,  on  legal  tenders,  187,  234, 
239,  241,  321 ;  opposes  McCulloch's 
policy,  210;  on  "  greenback  "  reserve, 
220;  on  paying  bonds  in  notes,  210; 
on  resumption  and  free  banking,  220, 
224. 
As  Secretary  of  Treasury,  233  ;  favors 
reissue  of  redeemed  greenbacks,  234, 
237;  establishes  gold  reserve,  237;  on 
paying  bonds  in  gold,  286,  289;  on 
silver,  297,  300;  on  national  banks, 
34i- 

"Sherman  Act"  of  1890,  254,  316,  572; 
shuffling  policy  of,  238. 

Shilling,  different  valuations  of,  n,  12,  13, 
45i  • 

Silver,  coinage  acts,  22,  40,  41,  44,  277,  280, 
485>  495.  553.  563 ;  coinage  statistics, 
33.  5°.  51.  52>  29^;  commission  of 
1876,  282-286;    conferences   on,  292, 

301,  368,  396;  exports  and  imports, 
51,  52,  296,  319,  392,  412;  deprecia- 
tion of,  286,  313,  365,  377,  417;  price 
of,  295,  318,  365,  392,  412,  417;  pro- 
duction, 18,  32,  50,  51,  52,  276,  295, 
318,  392,  412;  act  of  1878,  290,  563; 
acquisition  of,  under,  318,  593,  417; 
purchase  act  of  1890,  254,  316,  572; 
repeal,  373,  573;  acquisition  of,  under, 
393.  4X7;  scarcity  of,  41,  43,  49;  see 
also  Ratio,  Silver  Coin,  Silver  Dol- 
lars, Trade  Dollars. 

Silver  certificates,  authorized,  289,  565; 
small  denominations,  307,  403,  421, 
570,  580;  influence  of,  against  bank 
currency,  303,  312,  345,  356,  417; 
inflation  by  means  of,  241,  291. 

Silver  dollar,  adopted,  1786,  17,  454;  1792, 
22,  464;  coinage  suspended  by  Jeffer- 
son, 27;  coinage  of,  33,  50,  51,  52, 
296,  318,  392,  413;  act  of  1837  on,  41, 
485;  bullion  value  of,  41,  48,  232,  276, 
295,  318,  392,  412;  legal  tender  power 
of,  23,  41,  46,  49,  281,  289,  291,  399, 
403,  417,  466,  486,  564,  578;  demone- 
tized, 1873,  277,  553;  remonetized, 
1878,  289,   564;    circulation  of,  300, 

302,  308,  313,  318,  393,  413,  417;  re- 
demption of,  proposed,  398,  399,  409, 
421. 


Silver    question,    274-319;     beginning    of, 
232,  281 ;  pro  and  con,  387,  388. 
Contest  of  1896,  363-394;  of  1900,  395- 
410. 

Silver  standard,  1830,  35;  1834,  37;  Sher- 
man on,  297;  danger  of  going  upon, 
3°3.  3°5.  3°7>  355.  372- 

Sinking  fund,  184,  216,  501. 

Slavery  controversy,  influence  of,  on  cur- 
rency, 3,  102. 

Small  notes,  injurious  effect  of,  35,  36,  37; 
effort  to  limit,  92,  114,  115,  127,  129, 
152,  158,  161,  482,  487;  issue  limited, 
183,  190,  307,  323,  403,  421,  498,  499, 
500,  503,  505,  519,  565,  570,  580. 

Sound  money,  what  is  ?  8 ;  possible  only  by 
nationalization,  5,  7,  169. 

Sound  Money  League,  386. 

Spanish  dollar,  n,  12,  20,  26,  41,  464,  584, 
594,  622 ;  retention  of.  as  legal  tender, 
26,  470;  chief  medium,  n,  27,  584. 

Spanish  War.  1898,  400;  favored  adoption 
of  gold  standard,  401. 

Specie,  see  Gold,  Silver,  Circulation,  Re- 
sumption. 

Specie  circular,  Jackson's,  113,  127. 

State  bank-notes,  76-79,  86,  89,  91,  193; 
Crawford  on,  77,  91;  Guthrie  on, 
161-162;  Buchanan  on,  166;  con- 
stitutionality of,  130,  161,  179;  dis- 
counts on,  77,  131;  expansion  of, 
1817,  77,  1837.  113,  133;  disrepu- 
table condition  of,  90,  96,  in,  123. 
159,  169;  taxing,  115,  161,  191,  193, 
208,  259,  325,  509,  541,  543,  544,  561, 
Supreme  Court  on,  259,  327;  great 
contraction  of,  86,  151,  167;  regula- 
tion of,  by  Bank  of  U.  S.,  93, 96,  in ; 
movement  to  revive,  370,  381 ;  re- 
demption of,  89,  92,  138,  158,  160, 
169,  177,  under  Suffolk  system,  92, 
135.  156. 

State  banks,  73-78,  133-144,  151-174,  190. 
199,  320,  326;  discussed,  169,  172, 
426;  and  the  treasury.  78,  86,  90,  109, 
113,  124,  127,  149,  162,  181,  480;  re- 
form of  1820,  91,  of  1852,  152,  155; 
in  1861,  168;  in  1863,  327;  methods 
of  organizing,  74, 122,  158;  prohibited 
in  some  states,  155;  supervision  of, 
74,  91,  135,  156;  "wild  cat,"  138; 
statistics  of,  75.  76,  118,  134,  153,  167- 
169,  174,  327,  331,  335,  336,  346,  347, 
357.  36O'  394.  4X3'  see  a's0  under 
Indiana,  Louisiana,  New  York, 
Ohio,  Massachusetts. 

State  rights  doctrine,  influence  on  currency, 
2.  103;  vs.  Bank  of  U.  S.,  66,  88. 

Statistical  resume,  coinage,  33,  50,  51,  52, 
296;  exports  and  imports,  33,  51,  52, 


INDEX 


665 


121,  204,  228,  257,  296,  319,    392,    412; 

finances  and  debt,  203,  227,  256,  391, 
411;  failures,  348,  360,  394,  414; 
clearings,  174,  336,  348,  360,  394,  414; 
circulation,  75, 120,  154, 174,  204,  228, 
256,  391,  411 ;  national  banks,  336, 
347.  359.  394,  413;  state  banks,  75, 
118,  153,  174,  336,  347,  360,  394, 
413;  savings  banks,  174,  336,  348, 
360,394,414;  private  banks,  360,  394, 
413;  trust  companies,  347,  360,  394, 
413;  production  of  gold  and  silver,  18, 
32,  50,  51,  52,  295,  318,  392,  412; 
bonds,  348,  359,  391,  411;  gold  pre- 
mium, 204,  229,  258;  prices,  204,  229, 
258:  silver  purchases,  318,  393;  silver 
dollars  and  certificates,  318,  393, 
413;  price  of  silver,  295,  318,  392, 
412;  ratio,  18,  32,  50,  295,  318,  392, 
412;  Hank  of  U.  S  ,  second,  119; 
sales  of  gold  by  the  Treasury,  229; 
bullion  value  of  silver  dollar,  295, 
318,  392,  412;  gold  reserve,  392,  412; 
notes  redeemed  in  gold,  392,  412;  sil- 
ver in  the  Treasury,  318,  393,  413. 

Subsidiary  silver  coin,  suggested,  29,  43, 
44;  provided  for,  44,  280,  403,  495, 
553,  580;  legal  tender  of,  45,  280,  299, 
495,  553,  565 ;  redemption  of,  299,  565. 

Subtreasury,  Van  Buren  plan  enacted, 
124-129,  repealed,  144;  act  of  1846 
passed,  149,  488;  defects  of  system, 
150,151,  171;  and  bond  purchases, 
162,  165,  354,  423;  system  discussed, 
152,  162,  171,  423;  suspension  of  law 
in  part,  179,  499,  by  national  bank 
depository  law,  198,  530;  and  strin- 
gencies, 354,  423;  act  broadly  con- 
strued by  Shaw,  408;  remedy  for  evils 
of,  424;   populist  proposition,  367. 

Suffolk  Bank  system,  92,  135,  156. 

Supreme  Court,  on  nationalization,  6,  66-69; 
on  state  bank-notes,  130,  161,  taxing, 
259;  on  legal  tenders,  1st,  261-263, 
ad,  263-269,  3d,  270-272;  discussed, 
273,  419;  on  taxing  U.  S.  securities, 
259 

Surplus,  Treasury,  distribution  of,  114,  122, 
123,  125,  484;  bond  purchases  with, 
161,  165,  247,  250,  354. 

Suspension  of  specie  payments,  1814,  77; 
1837,  123;  1857,  163-167;  1862,  181, 
201;  prohibited  in  Bank  of  U.  S. 
charter,  82,  477. 

Tariff,  and  silver,  1890,  313,  386;  and  defi- 
cits, 1893  1896,  371,  380,  396. 

Taxation,  of  state  bank-notes,  suggested, 
115,  161,  191,  enacted,  193,  208,  325, 
509,  541,  543,  561,  Supreme  Court  on, 


259,  327;  of  national  banks,  324,  345, 
404,    432,    527,    570,    583;    of  U.    S. 
securities,   184,   215,    259,   501,    541, 
552;  of  U.  S.  notes,  259,  576. 
Temporary  loans,  184,  189,   191,   195,   501, 

5°3,  5°4- 
Three   per  cent  certificates,  209,  210,  327, 

544.  547- 
Trade  dollars,  coinage  authorized,  278,  553 ; 
suspended,  280,  563;  redeemed,  308, 

571- 
Treasury,  and  banks,  78,  86,  90,  109,  113, 
124,  127,  149,  162,  181,  199,  408;  con- 
dition of,  1812,  78;  1837,  124,  127; 
1857,  167;  i860,  168;  1861,  177,  199; 
1885,  246;  1889  and  1893,  371;  1897, 
390;  Treasury  notes,  1812-1815,  78, 
471.  473.  I837I842.  124,  127,  129, 
486,  1846,  150,  1857- i860,  167,  168, 
498;  discussed,  173;  legal  tender,  193, 

194,  195,  197 ;  see  also  U.  S.  Notes. 
Treasury  notes  of  1890,  proposed  and  au- 
thorized, 254,  314-317,  572;  issue  sus- 
pended,  373,  576;    redemption  of,   in 
gold,   372,   577;    retirement   of,    399, 

4°3.  579- 

"  Treasury  relief,"  use  of  surplus,  1854, 
161;  1857,165;  1873,221,332;  1890, 
354;  generally,  423. 

Trent  affair,  180. 

Trust  company  statistics,  347,  360,  394,  413. 

Tyler,  John,  favorable  to  Bank  of  U.  S., 
108;  on  national  bank,  144,  defeats 
project.  145.  146;  weak  policy  of, 
147;  favored  government  notes,  148. 

Unit,  dollar  adopted  as,  12,  16,  454,  464. 

United  States  Bank  of  Pennsylvania,  122, 
127,  130,  132,  133. 

United  States  notes  (legal  tenders),  pro- 
posed, 182;  authorized,  183,  500; 
form  of,  189;  further  issues,  190,  193, 
5°3.  5°5.   5°8:    limit   of  issue   fixed, 

195,  538;  conversion  into  bonds  pro- 
vided for,  183,  500,  repealed,  194, 
508;  retirement  begun,  207,  543; 
opposition  to,  209,  suspended.  210, 
544;  reissues  of  redeemed  notes,  217, 
220,  221,  checked,  223,  557;  resump- 
tion provided  for,  224,  560,  opposed, 
23°>  a33.  a35'>  reduction  of  vol- 
ume, 230,  234;  retirement  checked 
236,  565;  chronology  of,  227;  Chase 
on, 185;  Manning  on,  248;  Lincoln  on, 
191;  Hayes  on,  239,  241;  McCulloch 
on,  206,  328;  Sherman  on.  187,  234, 
239,  241,  321:  Carlisle  on,  381,  389; 
Cleveland  on,  381,  389;  redemption 
of,  in  gold,  239,  365,  372,  392, 
412,  577;    depreciation  of,   194,   196, 


666 


INDEX 


304,  229,  258;  denominations  of,  183, 
190,  307,  403,  421,  500,  503,  508,  570, 
580;  status  of,  in  1903,  418,  420;  bond 
issues  on  account  of,  237,  378,  380, 
382,  383,  420;  see  also  Gold  Reserve. 

Van  Buren,  Martin,  President,  on  banks, 
124,  127,  128;  subtreasury  scheme, 
124-129;  opposed  to  central  bank, 
127,  129. 

Washington,  George,  urges  passage  of  mint 
law,  22;  approves  charter  Bank  of 
U.  S.,  64. 


Webster,  Daniel,  opposes  charter  second 
Bank  of  U.  S.,  80;  favors  recharter, 
101;  on  utility  of  Bank  of  U.  S., 
no;  opposes  subtreasury  bill,  125; 
on  Tyler's  bank  vetoes,  146,  147. 

Whigs,  favor  Bank  of  U.  S.,  97-109;  oppose 
subtreasury  act,  124-129,  repeal  it, 
144,  again  oppose,  148;  attempt  to 
charter  third  Bank  of  U.  S.,  144-147. 

Windom,  William,  Secretary  of  Treasury, 
refunding  of  bonds,  242 ;  second  term , 
252;  on  silver  and  law  of  1890,  253, 
313-315;  policy  on  surplus,  1890, 
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•  and  gracious.  This  work  will  show  the  profound  insight  into  social  conditions  and 
the  practical  wisdom  which  we  all  expect  from  Miss  Addams.  As  the  title  implies, 
it  will  be  occupied  with  the  reciprocal  relations  of  ethical  progress  and  the  growth  of 
democratic  thought,  sentiment,  and  institutions. 

riunicipal   Engineering   and    Sanitation.    By  M.  N.  Baker, 

Ph.B.,  Associate  Editor  of  Engineering  News  ;  Editor  of  A  Man- 
ual of  American  Water  Works.     Cloth,  l2mo.     $1.25  net. 

[Now  ready, ,] 
This  work  will  discuss  in  a  general  introduction  the  city  and  its  needs,  and  the 
plan  of  the  city,  and  then  pass  on  to  such  practical  questions  as  ways  and  means  of 
communication,  municipal  supplies,  collection  and  disposal  of  wastes,  recreation  and 
art,  administration,  finance,  and  public  policy.  Mr.  Baker's  work  on  the  Engineer- 
ing News  and  the  annual  Manual  of  American  Water  Works  has  made  him 
known  as  one  of  the  leading  authorities  on  all  questions  of  municipal  policy.  He 
has  the  important  advantage  of  combining  the  technical  knowledge  of  the  engineer 
with  long  familiarity  with  economic  discussions;  and  it  is  expected  thaMhis  volume 
will  appeal  to  all  classes  in  any  way  concerned  in  municipal  affairs. 

American  Municipal  Progress.  By  Charles  Zueblin,  B.D., 
Associate  Professor  of  Sociology  in  the  University  of  Chicago. 
Cloth,  i2mo.     Now  ready.     $1.25  net. 

Professor  Zueblin  is  well  known  as  one  of  the  most  successful  University  exten- 
sion lecturers  of  the  country,  and  his  favorite  theme  in  recent  years  has  been  mu- 
nicipal progress.  In  the  preparation  of  this  work,  he  has  repeatedly  conducted 
personal  investigations  into  the  social  life  of  the  leading  cities  of  Europe,  especially 
England,  and  the  United  States.  This  work  combines  thoroughness  with  a  popular 
and  pleasing  style.  It  takes  up  the  problem  of  the  so-called  public  utilities,  public 
schools,  libraries,  children's  playgrounds,  public  baths,  public  gymnasiums,  etc.  All 
these  questions  are  discussed  from  the  standpoint  of  public  welfare. 

Irrigation  Institutions  :  A  Discussion  of  the  Economic  and  Legal 
Questions  created  by  the  Growth  of  Irrigated  Agriculture  in  the  West. 

By  Elwood  Mead,  C.E.,  M.S.,  Chief  of  Irrigation  Investigations, 
Department  of  Agriculture ;  Professor  of  Institutions  and  Practice 
of  Irrigation  in  the  University  of  California,  and  Special  Lecturer 
on  Irrigation  Engineering  in  Harvard  University.  Cloth.  i2mo. 
$1.25,  net.     Ready. 

This  book  is  based  on  twenty  years'  experience  in  the  development  of  irrigated 
agriculture  in  the  arid  West.  This  experience  brought  the  author  in  contact  with 
farmers,  ditch  builders,  investors  in  irrigation  securities,  legislatures  and  jurists,  who 
were  shaping  the  legal  principles  which  are  to  control  the  distribution  and  use  of 
Western  water  supplies,  and  the  social  and  economic  fabric  under  which  unnumbered 
millions  of  people  must  dwell.  AH  phases  of  the  subject  have  been  dealt  with  Irri- 
gation laws  are  so  ambiguous  or  contradictory  that  their  meaning  is  not  easy  to  inter- 
pret, and  the  water  rights  which  govern  the  value  of  farms  have  many  forms  and  are 
acquired  by  many  methods. 

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